[AndrewWoo]

The three stories that link this all together came after the London close yesterday with two overnight stories – 1) South Korean Pension cuts US Treasury Allocation; 2) Russia pushes for $10 bn investment in IMF SDR bond; 3) BRIC meeting June 16 to discuss alternatives to USD reserve. All of these stories helped push the USD 1% lower on the dollar index and above key resistance in EUR 1.41 and GBP 1.61. The movements in AUD – up to almost .80 and CAD 1.10 also flash the renewed focus on commodities with oil up $1 to $66 bbl and gold up $14 to $975. Concern about inflation doesn’t quite make sense given headlines of 0% in Europe today. What seems clear about the inflation argument is a subtle twist from month-end – that its about asset allocation and encouragement that higher risk is merited given the global recovery. Japan IP overnight highlights this argument. All of it adds to decoupling of growth and how that too adds to USD pressure. The data out in an hour on US GDP and than at 10 am on Michigan consumer confidence and Chicago PMI – all will be watched in that context. Expect today to be about how the USD weakness is the escape valve against the US having a deficit problem.

NEWS

South Korean Pension cuts equity and US Treasury exposure.
National Pension Service, which had 236 trillion won ($187 billion) of assets at end-2008, cut equity holdings to 30 percent or more from 40 percent or more in its annual revision of five-year targets, the health ministry said today in an e- mailed statement. The target for bonds will rise to less than 60 percent from less than 50 percent, according to the ministry, which oversees the fund. The target for returns was lowered to 6.5 percent from 7.5 percent. “The targeted return is to strengthen the stability of fund management” to reflect “downward revisions” in the global economic outlook and increased risks in each asset area, according to the statement. The Korean fund plans to reduce its exposure to U.S. Treasuries and to diversify its overseas investments in assets such as “credit bonds,” the ministry said.

Russia ready to invest $10 bn in IMF SDR denominated bond. http://www.themoscowtimes.com/article/600/42/377490.htm

We are holding preliminary discussions in the government ... about investing up to $10 billion in IMF bonds in the near future," Finance Minister Alexei Kudrin told President Dmitry Medvedev at a meeting broadcast Wednesday on Vesti-24 television. The government "will soon allocate" the money from its foreign reserves, Kudrin said at the meeting, which took place late Tuesday. Medvedev backed the idea, saying he hoped that the funds would be used to aid countries -- including Russia's neighbors -- who are "suffering the most from the financial crisis."