* Sources say Japan GPIF to boost stock allocation to over
* Yen slips as Tokyo shares push higher on the GPIF report
* Aussie dollar hits 2-month low after weak Australian jobs
* Euro holds steady above 9-month low, awaits ECB policy
(Updates after start of European trade, changes dateline from
By Patrick Graham
LONDON, Aug 7 The yen sagged against the dollar
on Thursday, coming under pressure from news that Japan's public
pension fund plans to increase its allocation to the domestic
The dollar rose 0.3 percent to 102.40 yen, pulling
away from a 1-1/2 week low near 101.76 yen set on Wednesday. It
was roughly steady against the euro and just below 11-month
highs against a trade-weighted basket of major currencies.
All eyes in Europe will be on the European Central Bank's
monthly news conference, starting at 1230 GMT, but the action
overnight was all about the yen and the Australian dollar. The
latter was down almost 1 percent to hit a two-month low after
data showed a rise in the Australian jobless rate.
The yen, attractive overnight for investors seeking shelter
from growing tensions between the West and Russia, weakened as
Tokyo shares pushed higher after political sources told
Reuters that Japan's Government Pension Investment Fund
(GPIF)plans to put over 20 percent of its funds in domestic
stocks compared with a current 12 percent target.
The sources familiar with the fund's plans said the GPIF,
which has around $1.24 trillion in total assets under
management, will likely lower its weighting for Japanese
government bonds to around 40 percent from a current 60 percent
target. It may also increase investments in global stocks when
it announces its new allocation plan sometime in the autumn.
Gains in equities tend to weigh on the safe-haven yen, as
investors target riskier assets on expectations of making bigger
"It is that news on the GPIF that has moved dollar-yen this
morning," said Daragh Maher, a strategist with HSBC in London.
"We had some peculiar price action late yesterday that is
also being retraced, but the GPIF story gave a fundamental
rationale for the push higher."
The Australian dollar, hammered by an unexpected jump in the
domestic jobless rate, was down 0.9 percent at $0.9268
in early European deals. It fell to $0.9263 at one point, its
lowest level since early June.
"The Aussie had been holding up better than the New Zealand
dollar and the data are a perfect excuse for some catch-up,"
said Kit Juckes, a currency strategist with French bank SG in
"Hopes of a chance to sell the Aussie back above 0.94 have
faded significantly. The Australian/US rate differential is
pointing firmly downwards for the currency from here."
The Reserve Bank of Australia kept its cash rate at a record
low of 2.5 percent on Wednesday, but the jobs numbers underlined
continuing worries over the economy's growth prospects after the
end of a mining investment boom.
The euro, down six full cents since early May on the back of
a moribund economic outlook and the raft of measures taken by
the ECB to ease monetary conditions, was down less than 0.1
percent at $1.3372.
On Wednesday, it had skidded to as low as $1.3333, its
lowest level since last November as disappointing data from
Italy and Germany soured sentiment toward the single currency.
The ECB is expected to leave interest rates on hold as it
assesses the impact of stimulus launched in June, when it cut
interest rates to record lows, became the first major central
bank to charge banks for holding their deposits overnight and
launched a new ultra-cheap, four-year loan programme.
Markets will be looking at how ECB President Mario Draghi
characterises the present state of the economy, given the risks
to Germany's economy are rising and the effect of Russian
sanctions and geopolitical risk may have lowered the ECB's
HSBC's Maher said Draghi could sidestep all questions
essentially by saying that we have to wait and see what impact
the policy measures taken in June have.
"But I think the sensible questions will be about whether
the downside surprises we have seen, Italy sinking back into
recession and so on, make it more likely the ECB will take
further steps," he said.
"I think the balance of risks is against the euro."
(Editing by Susan Fenton)