(Recasts after start of European trading)
* Dollar index firms, on track for slight weekly gain
* Recovers from this week's one-year low vs. yen
* Euro under pressure after Draghi signals more easing
* Expectations BoJ might move next week
By Patrick Graham
LONDON, Jan 22 (Reuters) - The dollar firmed against a basket of currencies on Friday, as rising expectations of monetary easing by central banks in Europe and Japan hit the yen and euro while prompting a strong recovery in global oil and stock markets.
The dollar index .DXY =USD , which tracks the greenback against a basket of six major rivals, rose about 0.3 percent to 99.356, below Thursday's more than one-month session high of 99.790 but on track to gain about 0.3 percent for the week.
The dollar also rose back above 118.00 yen to a one-week high in early trade in Europe JPY= , a reflection of official comments on the yen and expectations the Bank of Japan might decide to pump more money into the economy next week.
After European Central Bank chief Mario Draghi said the bank would need to reconsider policy again in March - read as a promise of more easing - sources familiar with the Bank of Japan's thinking said the turmoil on global markets could lead the BOJ to consider more asset purchases. thinking around a potential BoJ move seems to be shifting in light of the declining Nikkei," said Josh O'Byrne, a strategist with Citi in London, saying that was driving traders to close out bets on further yen strengthening against the dollar.
He put a 30-40 percent chance on the BoJ moving next week.
Both the euro and yen have benefited against the dollar from their status as funding currencies in the global interest rate carry trade. When sentiment is strong, investors borrow in the yen and euro and sell both to put money into other higher-yielding currencies. But when markets are concerned about the global outlook that trade tends to reverse, pushing money back into both.
That the euro remains as strong as it is reflects some of the doubts over the dollar's ability to rally further - or the Fed's to raise rates - that have only grown with a sometimes dizzying sell-off in stock markets this week.
Oil prices rose by around 4 percent on Friday, Tokyo's Nikkei by almost 6 percent and markets in Europe by 1.5-2 percent.
The euro traded at $1.0832 EUR=EBS , down about 0.7 percent on the week, but up from a two-week low of $1.0776 touched in the wake of Draghi's comments on Thursday.
"The recovery in risk is also clearly benefiting the dollar against the other majors," said a fund manager with one Swiss-based investment house. "But it was really noticeable yesterday how the euro held up after the initial fall on Draghi. Risk-wise, its still all on a knife edge." (Editing by Hugh Lawson)