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Yen sapped by pension plans; Euro keeps low profile after ECB

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The yen coming under pressure on Thursday, hurt by news that Japan's public pension fund plans to increase its allocation to the domestic stock market.

Separately, the euro held steady above $1.33 as investors digested the European Central Bank's decision to hold fire on interest rates. The central bank signaled on it stands ready to print money and buy bonds if the euro zone slides towards deflation, and warned the conflict in Ukraine poses a serious risk to the bloc's economy.

Speaking after the ECB held borrowing costs at record lows, its president Mario Draghi gave a frank assessment of the difficulties facing the 18 countries that use the euro - not least tit-for-tat sanctions between Russia and the Europe.


The dollar was flat near 102 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.

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.

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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 returns.

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 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.

--By Reuters. For more information on foreign exchange, please click here.

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