FOREX-Dollar eases as risk sentiment improves

* Dollar index down 0.4 pct at 79.457 .DXY

* Receding views of near-term U.S. rate hike weigh on dollar

* Yen also pressured as risk sentiment improves

* Aussie rises after consumer confidence jumps (Recasts, adds quotes, updates prices, changes dateline prvs TOKYO)

By Tamawa Desai

LONDON, June 10 (Reuters) - The dollar eased on Wednesday as investors shifted from the U.S. unit toward perceived riskier and higher-yielding assets on views the global economy and financial system are improving.

The U.S. currency also lost support as investors pared back speculation of higher U.S. interest rates by year-end.

Growing optimism over the global economy was reflected in a surge in Asian equities -- Tokyo's Nikkei average .N225 hit an eight-month high -- and U.S. stock futures were also up, indicating a higher open on Wall Street later in the day.

Risk sentiment was also buoyed after the U.S. Treasury said on Tuesday 10 of the country's biggest banks could repay $68 billion in taxpayer money received during the height of the credit crisis.

"We are still seeing a shift to risk assets on improving risk sentiment," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. "As long as a negative correlation between the dollar and risk persists, the dollar should remain on the back foot, as well as the yen."

But he added the market was in a consolidative phase and the dollar's decline would be limited until more data reinforced views the global economy was emerging from its worst recession in decades.

The dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.4 percent to 79.457 .DXY on the day after sliding more than 1 percent on Tuesday.

The euro rose 0.5 percent on the day to $1.4141 EUR=.

With a dearth of economic data, traders will keep an eye on equity markets and U.S. bond yields, which surged after a smaller-than-expected drop in U.S. payrolls last Friday raised expectations the U.S. Federal Reserve would tighten credit by the end of the year.

But U.S. interest rates futures pared back such expectations and short-dated Treasuries rallied on Tuesday, pulling yields from recent seven-month highs, after a solid auction of three-year notes.

But longer-dated issues struggled as the market awaited its big test in the form of $19 billion in 10-year notes for sale on Wednesday and $11 billion in 30-year bonds on Thursday.

"The 10-year auction will pose a much bigger challenge and could potentially add further broad-based dollar-selling pressure if the auction does not live up to expectations and if higher yields fail to attract enough indirect bidders," said analysts at RBC Capital markets in a note.

Meanwhile, the pound surged 0.7 percent to $1.6431 GBP=D4 after jumping about 1.7 percent on Tuesday as stronger-than-expected UK housing data and fading chances of a government collapse lifted sterling.

The yen was a big underperformer among major currencies.

The dollar rose 0.2 percent to 97.59 yen JPY=. It fell to as low as 97.08 yen on trading platform EBS earlier due to selling by Japanese exporters to repatriate overseas earnings.

Data showed core Japanese machinery orders unexpectedly slid 5.4 percent in April compared with March.

The Australian dollar jumped 1.3 percent to $0.8109 AUD=D4 after a surge in a key measure of Australian consumer confidence fuelled hopes the economy could pick up at the end of the year, reducing the need for more interest rate cuts. (Editing by Stephen Nisbet)