* Euro rises vs dollar, yen, markets await Greek aid
* Markets heartened as Greece prepares more austerity steps
* Euro to remain vulnerable, contagion risks in focus
(Adds comment, details, updates prices)
By Naomi Tajitsu
LONDON, April 30 (Reuters) - The euro rose on Friday, extending gains against the dollar as expectations Greece will soon receive emergency aid helped to quieten jitters about how Athens will pay its debts.
Investors were heartened a multi-billion-euro aid package aimed at avoiding a Greek default may be announced in coming days. This helped shrink the premium investors demand ito hold Greek government bonds over German paper, supporting the euro.
Earlier this week, concerns about Greece's escalating debt crisis and worries about credit risks in other vulnerable euro zone states pushed the euro to a one-year low versus the dollar.
Germany's finance minister said on Friday that Berlin, which is expected to carry the brunt of the cost of helping Greece, could wrap up a law on the assistance package in a week, ahead of regional elections. [ID:nBAT005367]
Analysts said a final announcement of the package would likely boost the euro, although the single currency would remain fragile as investors wait to see if Greece can make painful budget cuts to get its financial house in order.
"If the conditions of the aid are well received and the amount offered is sufficient, the euro could rise, but any gains will likely be short-lived," said Ulrich Leuchtmann, currency analyst at Commerzbank in Frankfurt.
"It will depend on whether Greece is able to make good on its promises to implement the terms."
By 0932 GMT, the euro <EUR=> had risen 0.7 percent on the day to a session high of $1.3319, according to Reuters data.
Market participants said the euro's gains against the dollar were prompted as the euro <EURJPY=R> rose 1 percent to 125.60 yen. Traders said stop-loss orders were triggered around 125.30 yen, and helped to accelerate the euro's gains.
The euro rose further from a low of $1.3114 hit earlier in the week, its weakest since April 2009. However, it was poised to post a 1.5 percent fall this month, its fifth straight month of losses, as investors remain negative on the currency.
Concerns about Greece's deficit problems have knocked the euro down nearly 12 percent against the dollar since December.
US GDP DUE
The dollar <.DXY> fell 0.3 percent against a currency basket to 81.747, as subsiding anxieties about Greece cooled risk aversion and trimmed demand for the safe-haven dollar.
The dollar <JPY=> rose nearly half a percent to 94.45 yen, as the yen came under broad selling pressure ahead of Japan's Golden Week holiday next week.
The Bank of Japan left rates unchanged at 0.10 percent on Friday, as widely expected. [ID:nTOE63R087]
In contrast, the Australian dollar <AUD=D4> rose 0.5 percent to $0.9315, its strongest in more than a week, boosted by speculation that Australian interest rates will rise next week.
Investors awaited a reading of first-quarter U.S. economic growth due at 1230 GMT. Expectations are for 3.4 percent annualised growth, which would suggest the U.S. economy is recovering faster than the euro zone and Japan.
ING analysts said a strong reading would be "increasingly incompatible" with the Federal Reserve's pledge, reiterated this week, to hold rates at essentially zero for an extended period.
"This boosts the likelihood that the Fed turns decisively more hawkish at its June 23 meeting," they said in a note.
They added: "This supports a stronger USD outlook, as will any further pick-up in market risk aversion and associated rise in concern over USD funding needs."
(Editing by Nigel Stephenson)