* Nikkei hits 3-month low; Asia banks, tech shares suffer
* U.S. dollar rallies, hits 2-month high vs euro
* Disappointment with policy actions drive risk aversion
By Kevin Plumberg
HONG KONG, Feb 17 (Reuters) - Asian stocks fell on Tuesday,
with Japan's Nikkei hitting a three-month low, while the U.S.
dollar surged as investors scrambled for safety from
deteriorating global economic conditions and volatile banks.
U.S. stock futures fell 1.6 percent, indicating a weak open
on Wall Street after a holiday on Monday, ahead of results from
the world's largest retailer Wal-Mart Stores Inc <WMT.N>.
European shares dropped more than 1 percent overnight on
fears that losses in the financial sector will worsen and
require more government aid, setting the tone for the Asian
session.
Fiscal strains across Portugal, Ireland, Greece and Spain
and severe financial weakness throughout emerging Europe all
gave dealers more incentive to push the euro to a two-month low
against the dollar and scoop up safe-haven U.S. Treasury debt.
"The risk aversion trades are likely to keep making money
-- albeit amid volatility -- until new measures are unveiled by
governments and central banks in key economies," said Dariusz
Kowalczyk, chief investment strategist with SJS Markets in Hong
Kong, in a note.
"Judging by the insufficient policy response so far, the
near term market outlook remains negative."
Countless economic stimulus packages and open promises to
take more action by policymakers have so far all been met with
disappointment by investors, with not even the $787 billion
pledged by Washington making a dent in negative sentiment.
Exports across Asia have collapsed and the latest Reuters
Tankan poll of Japanese manufacturers shows confidence remains
mired near record lows [].
A more than 3 percent decline on Hong Kong's Hang Seng
index <> led the region down, with banks such as China
Construction Bank <0939.HK> and HSBC <0005.HK> under pressure.
Japan's Nikkei fell 1.45 percent, hitting its lowest since
November 2008. Japanese bank stocks dropped, with shares of top
lender Mitsubishi UFJ Financial Group <8306.T> down 4.3
percent, in the wake of a big loss at HBOS, a unit of Britain's
Lloyds <LLOY.L>.
Losses in the technology and financial sectors dragged the
MSCI index of Asia-Pacific stocks excluding Japan
<.MIAPJ0000PUS> down 2.7 percent, falling further below its
50-day moving average. The technical indicator has capped the
index for the past month.
SCHIZOPHRENIC
The dollar shot higher as investors cut down risks and held
on to liquidity amid global market volatility.
Even the yen, which has often gained during periods of
heightened market volatility, slid against the U.S. currency,
though not as much as the euro.
Heavy euro selling tripped automatic sell orders planted
just below $1.27 and the currency fell more than 1 percent to
about $1.2640 <EUR=>, its lowest since early December.
The dollar rose as high as 92.44 yen <JPY=>, its strongest
since early January.
Emerging Asian currencies broadly weakened against the
dollar.
"We believe there is more to come as the schizophrenic gap
between rather resilient Asian currencies recently and ugly
economic data closes," said Sebastien Barbe, currency
strategist with Calyon in Hong Kong, in a note.
The renewed focus on safety funnelled investors into U.S.
government debt, pushing yields lower across maturities. The
benchmark 10-year yield <US10YT=RR> tumbled to 2.82 percent
from about 2.89 percent late on Friday.
The 2-year yield fell to 0.91 percent from 0.97 percent.
Japanese government bonds also rose on the back of the
rally in Treasuries, with the March 10-year future up 0.5 point
<2JGBv1>.
U.S. crude futures <CLc1> were down 2.2 percent to $36.69 a
barrel, having lost 12 percent so far in February.
(Editing by Dhara Ranasinghe)
