FOREX-Dollar near 3-month high vs yen, boosted by U.S. bond yields

* Dollar/yen steady below 3-month high set this week

* This week's rises in U.S. bond yields underpin dollar/yen

* Sterling slips, awaits U.K. GDP data later in session

By Jemima Kelly

LONDON, Oct 27 (Reuters) - The dollar traded close to a three-month high against the yen on Thursday, underpinned by higher U.S. bond yields and growing expectations that the U.S. Federal Reserve will raise interest rates by the end of the year.

The market is now pricing in a 74-percent chance that the Fed will raise rates at its December meeting, according to CME Group's FedWatch tool, following a series of hawkish comments from Fed policymakers.

Those expectations have driven the dollar to nine-month highs against a basket of currencies this week, and it was up 0.1 percent on Thursday at 98.716, just off those highs.

Bets on a 2016 Fed rate hike have also supported U.S. 10-year Treasury yields, which rose to 1.813 percent in Asian trade, their highest since this month's five-month high of 1.814 percent. In turn, those have supported the dollar.

"We're see a renewed pick-up in Fed rate hike expectations, which will likely intensify going into the November Fed meeting next week," Credit Agricole's head of G10 currency research, Valentin Marinov, said.

"We will be looking for an explicit indication in the statement that rates will be going higher in December."

Marinov said that the dollar was also being supported by a pick-up in corporate demand for dollar funding into the end of the year.

Against the yen, the greenback rose 0.2 percent to 104.65 , just off its high of 104.875 touched on Tuesday.

With the Bank of Japan seen likely to keep its monetary policy steady for a while and to stick to its pledge to guide 10-year government bond yields around zero percent, U.S. bond yields will be the main driver for dollar/yen for the time being, UBS Wealth Management FX strategist, Tan Teck Leng, said.

In focus for European traders were policy decisions from Sweden's and Norway's central banks, due at 0730 GMT and 0800 GMT respectively. Neither is expected to ease policy further this month, so any new additional measures would drive down those countries' currencies .

Sterling eased 0.3 percent to $1.2210, but remained above an 18-day low of $1.2082 plumbed on Tuesday.

The market will look to the third quarter U.K. GDP data due at 0830 GMT for the latest clues on how the economy is holding up in the aftermath of Britain's vote to leave the European Union.

For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Editing by Louise Ireland)