* US Q2 GDP, jobless claims fail to ease risk aversion
* Yen hits 5-week high vs dollar, climbs vs sterling
* Struggling shares curb risk demand (Updates prices, adds fresh comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 27 (Reuters) - The yen climbed across the board on Thursday, hitting a five-week high against the U.S. dollar, as a pullback in global stocks raised concerns that a risk rally in past months may have been overdone.
Trade in the Japanese currency took its cue from a fall in Shanghai stocks, which have been a driver of risk trades in past weeks. European shares were also down, and stocks on Wall Street tumbled, led by the energy and technology sectors.
The yen is viewed as a safe-haven currency along with the dollar and tends to strengthen when risk appetite tumbles.
A revised report showing a slower-than-expected contraction in the U.S. economy in the second quarter and a fall in weekly jobless claims briefly lifted the dollar versus the yen. But the overall tone was still one of caution.
Win Thin, senior currency strategist at Brown Brothers Harriman in New York, for instance, wasn't particularly enthused about the jobless claims report and said he was not surprised that currencies driven by an appetite for risk, such as the euro, didn't take off.
Though the number of U.S. workers on long-term unemployment benefits fell to the lowest level since the first week of April, Thin said, "Much of the improvement was due to people losing their eligibility for unemployment benefits due to the length of time collecting."
He cited the so-called exhaustion rate, the percentage of unemployed workers who couldn't find a job before drawing their last benefit check, which rose to 50.7 percent in July, the highest since 1972.
"I just think that the market is getting ahead of itself in terms of pricing in an improvement in the fundamental outlook," he said.
YEN SHORT-COVERING
In midday New York trading, the dollar was 0.7 percent lower at 93.54 yen, having fallen as low as 93.38 yen on Reuters trading platform, its lowest since July 22.
The yen rose against sterling, pushing the pound to 151.02 yen, its lowest since mid-July. It was last at 151.28 yen, down more than 1 percent.
The euro fell 0.8 percent on the day against the Japanese currency to 133.28.
Traders said the yen's gains came as investors continued to cover short positions, which had knocked down the Japanese currency last week.
Some in the market said the yen was also supported by a report that China's sovereign wealth fund would increase new foreign investment this year by around 10 times from last year and was exploring investment in Japan.
Adding to the market's diminished risk appetite was a report from the Federal Deposit Insurance Corp on Thursday saying the number of problem U.S. banks and thrifts rose sharply to 416 in the second quarter from 305 in the first quarter. The FDIC also said the financial industry reported a $3.7 billion loss in the second quarter.
The U.S. dollar, on the other hand, was mixed on Wednesday. It was little changed versus the euro and despite the generally higher risk aversion in the market was actually lower than the Australian dollar, a currency viewed as high risk.
The euro was trading flat at $1.4253, while the Australian dollar was up 0.7 percent at US$0.8328.
"The chance of a breakout from existing trading ranges looks even less threatening than it has over the past several sessions," said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.
"FX markets could remain in a holding pattern for several days, with U.S. payrolls late next week the next identifiable event that could trigger an FX move in either direction. (Editing by Leslie Adler)