(Reuters) - The dollar made little headway on Friday in subdued trade as traders marked time ahead of a Group of 20 leaders' summit this weekend, but remained wary about chasing riskier assets given debt and growth worries.

The yen held near one-month highs against the dollar hit on Thursday.

Market players were wary of a lack of consensus at the G20 summit with open disagreements about how quickly to shrink government deficits, how best to strengthen banks so they can withstand any new downturn, and how to harmonize financial regulatory reforms.

It's a little bit of strange situation as the euro should usually suffer more in periods of risk aversion, but we are seeing some position adjustments ahead of the G20, said Roberto Mialich, currency strategist at Unicredit in Milan.

The yen and Swiss franc are expected to stay firmly bid on the back of risk aversion, he said.

By 0743 GMT, the euro was flat on the day at $1.2330, with a downside target seen around the $1.2150/1.2200 area. Resistance was seen near the week's high of $1.2490.

Traders will also keep an eye on stock markets for direction as the euro remains highly correlated with the S&P 500 index .SPX at a solid 63 percent.

S&P 500 stock futures were 0.3 percent higher in early European trade. European shares also gained .FTEU3 after Tokyo's Nikkei stock average .N225 dropped 2 percent.

DOLLAR STRUGGLES

While the dollar is normally seen as a safe haven, it has struggled to rise after the U.S. Federal Reserve earlier this week gave a less optimistic view on the economy and reiterated interest rates would remain low for an extended period.

Concerns about any fallout for U.S. banks, as U.S. lawmakers sought to finalize financial reform bills, also kept the greenback on the back foot.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was little changed at 85.67 .DXY. Support was seen near the week's low of 85.09.

The dollar stood at 89.66 yen after hitting a 1-month low of 89.22 yen on trading platform EBS on Thursday.

Dollar/yen options barriers at 89 yen and below are likely to check gains for the Japanese currency in the near-term but some traders said momentum indicated the yen would eventually test the year's high of 87.95 yen hit on May 6.

Declines in Asian shares prompted yen buying against other currencies as investors pared back risk.

It's all about cutting risky positions with falls in yen crosses leading the market, said a trader for a Japanese trust bank.

G20 discussions on currency issues, particularly the Chinese yuan, may have been deflected somewhat as China took steps last week to de-peg its currency.

On Friday, China's central bank set the yuan's daily mid-point at 6.7896 per dollar, the highest level since the July 2005 revaluation. It meant China has allowed its reference rate to rise 0.6 percent this week.

It was tactical of China to move ahead of the G20 to rule out further pressure about its currency, Unicredit's Mialich said.

The Australian dollar pared gains to trade down 0.3 percent at $0.8642.

(Additional reporting by Rika Otsuka in Tokyo, editing by Mike Peacock)

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