FOREX-Dollar hits '09 lows vs Aussie, pound on risk appetite

* Jump in U.S. pending home sales boosts risk appetite

* Aussie sets 8-mth highs on stronger-than-expected GDP

* Sterling hits 7-mth peak above $1.6600

* Fed chief Bernanke to speak later, Treasuries eyed

By Aiko Hayashi

TOKYO, June 3 (Reuters) - The dollar hit the year's lows against the Australian dollar and sterling on Wednesday after upbeat U.S. housing data the previous day buoyed risk appetite and reduced safe-haven demand for the greenback.

The Australian dollar set eight-month highs against the dollar and yen after data showed the economy managed to avoid recession in the first quarter of the year and grew more than expected. [ID:nSYD468578]

The Australian dollar rose to $0.8264 , its highest since late September, and sterling climbed to $1.6635 , the highest since late October.

"Unless something happens to to change this oddly optimistic mood, I think the trend will remain tilted towards avoiding buying the dollar," said a trader for a major Japanese bank.

The dollar's fall has gained steam over the past few weeks, as improving risk appetite and worries about ballooning U.S. debt issuance led to a decline in safe-haven demand for the dollar.

The dollar extended its losses in the wake of data the previous day that showed U.S. pending home sales posted their biggest jump in 7-½ years in April, suggesting the U.S. housing market, which is key to an economic revival, is on the mend and reinforcing optimism about a global economic recovery. [ID:nN02503338]

The euro rose 0.1 percent to $1.4315 , edging back towards a five-month high of $1.4332 hit on trading platform EBS the previous day.

The dollar hovered near the year's low against a basket of currencies. The dollar index dipped 0.1 percent to 78.411 <.DXY>, after falling to 78.334 on Tuesday, its weakest level since mid-December.

The dollar dipped 0.1 percent against the yen to 95.66 yen .

BERNANKE'S TESTIMONY

Focus now turns to U.S. Federal Reserve Chairman Ben Bernanke's testimony before the House of Representatives Budget Committee at 1400 GMT.

The market is waiting for clues on whether the Fed will increase or speed up purchases of longer-dated Treasuries to keep down interest rates.

"What's happening in the currency market lately is that the dollar has been sold as Treasury yields have gone up," said Tohru Sasaki, chief FX strategist at JP Morgan in Tokyo.

The benchmark 10-year Treasury note yield has risen about 100 basis points to 3.61 percent since the Fed said in March it would buy longer-dated paper, and analysts say a yield of 3.5-4 percent would eventually lead to higher mortgage rates. [ID:nN02613751]

"If Bernanke shows a less proactive attitude than market expectations toward increasing the size of purchases of government debt at the Fed's next meeting, long-term interest rates could rise and that could lead the dollar lower," Sasaki said.

It is hard to take a bullish view on the dollar at this juncture, said Shinichi Hayashi, a currency trader for Shinkin Central Bank.

"Generally speaking it's also hard to think the dollar will strengthen going forward considering the eventual fallout of GM's bankruptcy on the real economy and the mounting (U.S.) budget deficits," Hayashi said.

General Motors Corp filed for bankruptcy protection on Monday, the third-largest filing in U.S. history and the largest ever in U.S. manufacturing. [ID:nCARS1] (Additional reporting by Masayuki Kitano; Editing by Chris Gallagher)