UPDATE 1-S.Korean reserves dive in May on intervention talk

(Updates with details)

SEOUL, June 3 (Reuters) - South Korea's foreign reserves posted their second-biggest loss in a decade in May, data showed on Tuesday, after dealers reported authorities dumped some $2.5 billion during the month to prop up the local currency.

Foreign exchange reserves fell $2.28 billion to $258.2 billion by the end of May from $260.5 billion a month before, the Bank of Korea said in a statement, citing its dollar supply to the swaps market as one reason for the downturn.

It marks the second-biggest monthly loss in foreign exchange reserves since the 1997 Asian financial crisis after a drop of more than $3 billion in April due to the repayment of government bonds at maturity, the central bank said.

South Korea had the world's sixth-largest foreign reserves as of the end of April.

As is the case with most countries, finance ministry and central bank officials have declined to confirm the reported interventions in the local spot currency market, which took place on at least two occasions, on May 21 and 27.

The finance ministry has the final say in foreign exchange policy, although it is the central bank that actually buys or sells dollars in the local market for intervention.

The won KRW= has lost almost 10 percent against the dollar this year, and more than 15 percent against the yen JPYKRW=R as its decline against the U.S. unit bucked the Japanese currency's rise.

The figures come after government data showed on Monday consumer inflation shot up to a seven-year high in May, putting the central bank under pressure to raise interest rates while resisting government demands for a cut to lift the economy.