* Yen slips as risk tolerance up, Aussie gains
* Market watching ECB for signs of unconventional easing
* G20 draft communique: to regulate big hedge funds
By Charlotte Cooper
TOKYO, April 2 (Reuters) - The yen fell on Thursday, losing ground to higher-yielding currencies as stock markets rose on hopes a deep recession is moderating, but ranges were tight as the market awaited a European Central Bank policy decision.
Investors were also keeping a close eye on possible steps for the global economy from a Group of 20 meeting, but with the ECB expected to cut its main rate to a record low of 1 percent the focus on was on what it might say on unconventional easing.
Markets are keen to see if it will follow the U.S., British, and Japanese central banks in buying corporate or government debt to boost money supply in policy known as quantitative easing, although many doubt it is ready take that step.
The decision is due at 1145 GMT and ECB President Jean-Claude Trichet will answer questions at 1230 GMT.
"If Trichet mentions any untraditional measures this could be a negative surprise for the euro," said Toru Umemoto, chief FX strategist Japan at Barclays Capital.
The dollar plunged in March when the Federal Reserve announced it would buy large amounts of government debt, with investors fearing this would flood the market with dollars.
Alan Ruskin, a strategist at RBS, wrote in a research note it was possible Trichet would duck questions on quantitative easing but any sign of commitment to such a step would hit the euro.
"At a minimum, it should result in a full unwind of the U.S. QE led euro/dollar spike and a move back down to $1.3000, taking out the recent 1.3110 low," Ruskin wrote.
The euro edged up 0.2 percent to $1.3276, although it was still within sight of Monday's two-week low near $1.3100 and chart support at its 100-day moving average of $1.3137.
RISK TOLERANCE
The Australian dollar picked up pace as a strong show by Asian stock markets and a gain of 1.3 percent in S&P futures indicated investors were tolerating more risk.
The Aussie tended to fall as risk aversion rose at the height of the global financial crisis while the yen gained as investors unwound interest rate plays and sought it as a safer haven.
U.S. shares rallied on Wednesday as factory and home sales data raised hopes the economic downturn was moderating, even though other numbers showed job losses mounting. U.S. auto sales data also boosted hopes the car market was neaut said regulation would extend to systemically important hedge funds.
G20 leaders were also set to pledge to cooperate on economic policy, boost funds for the International Monetary Fund and refrain from competitive devaluations of their currencies as they seek to ward off a deepening global slump. (Editing by Michael Watson)