* 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 prices, recasts before ECB news conference)
By Patrick Graham
LONDON, Aug 7 The yen sagged against the dollar
on Thursday on news that Japan's public pension fund plans to
increase its allocation to the domestic stock market, while the
euro was flat ahead of a monthly decision on interest rates.
The dollar rose 0.2 percent to 102.33 yen, pulling
away from a 1-1/2 week low near 101.76 yen set on Wednesday.
After a bullish month of trading which has raised expectations
of a longer-lasting rally, the greenback was just below 11-month
highs against a trade-weighted basket of major currencies.
All eyes in Europe were 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 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.
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 $1.3379.
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 keep rates on hold as it assesses the
impact of stimulus it launched in June, when it cut 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. [ID:ID:nL6N0QC342]
Markets will be watching how President Mario Draghi
characterises the state of the economy, given the pressure that
risks to German growth and Russian sanctions may put on the
overall euro zone outlook.
HSBC's Maher said Draghi could sidestep all questions
essentially by saying that that he has 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 and Hugh Lawson)