* Dollar/yen pulls further away from 1-month high
* Aussie gains after Australia's Q1 GDP exceeds forecasts
* Dollar index trades below recent 2-month peak (Updates prices, adds comments)
By Masayuki Kitano
SINGAPORE, June 1 (Reuters) - The dollar fell against the yen on Wednesday, pulling away from a one-month peak set earlier in the week, with its drop gaining momentum after breaching technical support levels.
The dollar shed 0.7 percent to 109.95 yen JPY= , weakening from Monday's peak of 111.455 yen, which had been the greenback's strongest level since late April.
The dollar's retreat against the yen gained added steam after it slipped below support at levels around 110.30 yen on the daily Ichimoku chart, a technical analysis tool popular among traders.
The yen's rise came on a day when Japanese Prime Minister Shinzo Abe is expected to formally announce a delay to a scheduled sales tax hike. told members of his ruling Liberal Democratic Party (LDP) on Wednesday that he will delay the tax by two and half years, the Kyodo news agency reported. The premier is due to hold a news conference at 0900 GMT.
Since a delay in the sales tax hike is already widely expected, one focus is whether that will be accompanied by more fiscal spending and how that affects Tokyo shares and risk sentiment.
"The market is kind of looking at between 5-10 trillion yen," said Tan Teck Leng, FX strategist for UBS Wealth Management in Singapore, referring to expectations on the possibility of an extra Japanese budget.
If any supplementary budget were to come in at the lower end of expectations, there could be some disappointment, Tan added.
Against a basket of six major currencies, the dollar sagged 0.1 percent to 95.764 .DXY , pulling away from a two-month high of 95.968 set on Monday.
Data released on Tuesday showed that U.S. consumer spending recorded its biggest increase in more than six years in April but consumer confidence dipped and a survey on business activity in U.S. Midwest also underwhelmed. upshot was that investors slightly lowered their expectations for a rate hike by the Federal Reserve over the near term, which weighed on the greenback.
The Australian dollar pushed higher after the country's first-quarter economic growth exceeded market forecasts and prompted investors to scale back expectations for the Reserve Bank of Australia (RBA) to lower interest rates soon. Aussie dollar rose to $0.7300 at one point, pulling away from a 2-1/2 month low of $0.7145 set last week. The currency last traded at $0.7273 AUD=D3 , up 0.6 percent.
Some analysts said gains in the Australian dollar could be limited in the near-term despite the strong GDP number.
"In our view, the job market remains fragile. Hence domestic demand will remain weak," Roy Teo, senior FX strategist for ABN AMRO (AS:ABNd) Bank in Singapore, said in a research note
He expects the currency to face resistance at $0.7350 ahead of U.S. jobs data due out on Friday. He also expects the RBA to cut interest rates in August.