* Yen pares gains as US stock futures, Nikkei turn higher
* Investors awaiting results of U.S. bank stress tests
* Some focus on Japan mutual fund launches towards month-end
By Masayuki Kitano
TOKYO, April 23 (Reuters) - The yen gave up early gains and slipped broadly on Thursday as U.S. stock futures and Tokyo share prices turned positive, spurring buybacks of higher-yielding currencies against the yen.
The yen rose broadly earlier in the day as concerns about the banking sector re-emerged in the wake of disappointing earnings from Morgan Stanley on Wednesday.
Investors are concerned about the outlook for banks ahead of the U.S. government's "stress test" results, and an initial dip in U.S. S&P futures also helped temper risk appetite and lent support to the yen.
But the Japanese currency later came under pressure as S&P futures turned positive and rose 0.8 percent, while Japan's Nikkei share average shed its earlier losses and climbed 1.4 percent.
"The flows that are coming out are probably from hedge funds. I get the sense that traders are just sticking to short-term trading," said a trader at a major Japanese trading house.
The yen may also be facing some pressure from yen-selling flows linked to a slew of Japanese investment trusts expected to be launched towards the end of the month, he said. Some of these funds will invest in overseas assets or give investors the option of taking on foreign exchange risk.
But other market players said the upcoming launches had not affected currency markets.
The dollar was steady against the yen at 98.05 yen, after falling to 97.63 yen on trading platform EBS earlier, just shy of a three-week low of 97.57 yen hit on Wednesday.
The euro rose 0.3 percent to 127.78 yen, having rebounded from a one-month low of 126.10 yen hit earlier this week.
Against the dollar, the euro rose 0.2 percent to $1.3030, up from this week's one-month low of $1.2888.
The Australian dollar and New Zealand dollar, two currencies that tend to rise when equities climb, both gained against the yen.
EYES ON STRESS TESTS
The Wall Street Journal reported that U.S. banks will be briefed by regulators as early as Friday on how they performed in the stress tests before the results are made public later.
Some estimates of banks' likely losses that were used in the stress tests were tougher than expected, the newspaper said.
"Investors will continue to be cautious until May 4, and the market will likely fluctuate in reaction to both positive and negative news that might come out in the meantime," said Masafumi Yamamoto, head of FX Strategy Japan at the Royal Bank of Scotland, referring to the date on which the test results are due to be made public.
"What's behind the cautiousness is a view that the situation surrounding U.S. banks is still severe, even though the worst may be behind them," Yamamoto said.
The Australian dollar initially climbed against the yen after Japanese beer maker Kirin Holdings said it had offered to buy all shares in Australian brewery Lion Nathan.
It briefly gave up its gains against the yen and the dollar as Asian shares came under pressure, but later regained ground, rising 0.8 percent to 69.54 yen and edging up 0.5 percent to $0.7094. (Additional reporting by Satomi Noguchi and Aiko Hayashi; Editing by Joseph Radford)