* S.Korea pension service says to cut US bond holdings
* Dollar/yen dips on Japan exporter selling
* Dollar broadly under pressure as risk appetite warms
* Dollar index on course for worst month since December
By Rika Otsuka
TOKYO, May 29 (Reuters) - The dollar slipped towards a
five-month low against a basket of currencies on Friday as signs
the global recession may have passed its worst and concern about
ballooning U.S. government debt prompted investors to sell the
safe-haven currency.
The dollar was under pressure again a day after strong U.S.
durable goods data reduced the need for investors to hold the
world's most liquid currency. []
Demand for dollars can rise in times of extreme money market
stress or when U.S. investors turn risk-averse and repatriate
funds from abroad.
But such demand has waned in recent months and there is a
renewed focus on whether overseas investors will retain their
appetite for U.S. government debt at a time when issuance is
climbing.
"The main focal point in the forex market continues to be the
U.S. Treasury market," said a senior trader at a big Japanese
bank. "Given its huge size, people just cannot take their minds
off the possible impact the market could have on exchange rates
and share prices if things get ugly."
Traders said news that South Korea's National Pension Service
(NPS) would reduce exposure to U.S. government bonds and risky
assets such as equities in its five-year portfolio added to
pressure on the dollar.
The NPS is expected to manage 432 trillion won ($343.7
billion) by the end of 2014, and U.S. government bonds account
for 83 percent of the pension fund's direct holdings of foreign
bonds, which are currently worth $6.5 billion. []
The dollar index <.DXY>, a gauge of the U.S. currency's
performance against six major currencies, dipped 0.3 percent to
80.287.
The index struck a five-month low of 79.805 late last week on
concerns that U.S. government debt may lose its AAA-rating
status, and it is down over 5 percent for the month, the biggest
monthly fall since it dropped more than 6 percent in December.
The euro gained 0.3 percent from late U.S. trade to $1.3984,
crawling towards last week's peak of $1.4051, its strongest since
early January.
The dollar hit a five-month low against the Swiss franc of
1.0786 francs <CHF=> and fell to an eight-month low against the
Australian dollar of $0.7916 <AUD=D4>.
The dollar fell 0.3 percent against the yen to 96.55 yen
<JPY=>, due partly to selling by Japanese exporters, but was well
above a two-month trough of 93.85 yen marked last week.
The yen, however, fell to an eight-month low against the
Australian dollar of 76.38 yen <AUDJPY=R>.
The euro was steady against the yen at 135.06 yen <EURJPY=R>,
near a seven-week peak of 135.30 yen hit on Thursday when it
climbed more than 2 percent against the Japanese currency.
"The firmness in stocks has boosted Japanese retail
investors' risk appetite," said Tsutomu Soma, a senior manager in
the foreign securities department at Okasan Securities, adding
that household investors' money is also flowing out of the
country through pension funds.
"Profit-taking in overseas currencies may temporarily lift
the yen, but the downward trend in the yen is likely to stay
intact," Soma said.
(Additional reporting by Masayuki Kitano; Editing by Joseph
Radford)
