* U.S. dollar slides on uncertainty about Russia
* Yen climbs broadly after spike in volatility
* Oil briefly dips near $70, questions on demand remain
* Investors pause and see if prices reflect economic
reality
(Repeats to additional subscribers)
By Kevin Plumberg
HONG KONG, June 16 (Reuters) - The U.S. dollar slid on
Tuesday after Russia, before a meeting of the biggest emerging
market powers, said the world needs new reserve currencies,
while Asian stocks fell, as investors cut their holdings of
riskier assets and bought yen.
A day after Russian finance minister Alexei Kudrin said the
dollar's status as the world's main reserve currency would
unlikely change in the near term, the country's president
called for new ones, confusing investors about Russia's
position. []
With volatility creeping higher and uncertainty rife,
investors as they did during the worst days of the financial
crisis, turned to the yen.
Major European stocks opened slightly firmer, with the
pan-European FTSEurofirst 300 <> gaining 0.27 percent.
according to financial bookmakers, with dealers watching
resource-related shares closely after oil briefly fell below
$70 a barrel, down for a third day after hitting the highest
since October last week.
Japan's Nikkei share average closed 2.9 percent lower, the
biggest single-day drop since March 30, led by a 4 percent
decline in shares of Honda Motor Co. <7267.T>
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 1.8 percent, with losses in the energy and
materials sectors the biggest drag.
Materials stocks have been driven by a rapid rise in metals
and other raw materials prices on hopes outperforming, large
economies such as China's would keep devouring commodities.
Since the latest global equity rebound began on March 9,
the MSCI all-country world index <.MIWD00000PUS> has risen 35
percent, but the materials sector <.MIWD0MT00PUS> has gained
about 49 percent.
Hong Kong's Hang Seng index <> slid 2.8 percent.
Resource-sensitive stocks were among the biggest drags on the
market, with Asia's largest oil-and-gas producer PetroChina
<0857.HK> falling 4.2 percent.
"I don't see a lot of evidence of a really solid economic
recovery. All I see is a moderation in the rate of decay,"
Frank Villante, chief investment officer at Souls Funds
Management in Sydney.
The U.S. 500 stocks index <.SPX> fell 2.4 percent on
Monday, the biggest daily decline since May 13. The Dow Jones
industrial average <> and Nasdaq <> both dropped more
than 2 percent.
IS VOLATILITY BACK?
The Chicago Board Options Exchange Volatility index, better
known as the VIX <.VIX>, jumped 9.5 percent on Monday, the
largest single-day rise since April 20.
The index, which is based on prices of options on the S&P
500, is used by global investors as a benchmark for risk
taking.
The stronger indications of volatility ahead drove
investors to buy the yen, which was one of the biggest movers
in Asian trade. During the most violent days of the financial
crisis, the yen consistently strengthened, thanks to Japan's
relatively unscathed banking industry.
The U.S. dollar dropped 1.6 percent to 96.30 yen <JPY=>,
while the euro fell 1.1 percent to 133.45 yen <EURJPY=>.
The euro rose 0.5 percent against the dollar to $1.3852
<EUR=> after earlier falling and testing a technical obstacle
down around $1.3750.
The outlook for the euro darkened after an European Central
Bank report said euro zone banks may need to write down another
$283 billion, but equally potent were fears about how expensive
it would be for the U.S. government to finance its growing
budget deficit.
"The themes of dollar-debasement and a sick European
banking sector are powerful ones and depending on which theme
grows in intensity, the dollar could move decisively in either
direction. Right now, the mood is for downside in euro/dollar,"
Ashley Davies, currency strategist with UBS in Singapore, said
in a note.
U.S. crude futures were under pressure for a third day. The
July contract <CLc1> was down 0.2 percent at $70.50 a barrel
after earlier touching a session low of $69.90.
Investors continued to find some value in late maturity
U.S. Treasuries. The benchmark 10-year yield <US10YT=RR>
slipped to 3.70 percent from 3.73 percent late in New York on
Monday.
The 10-year yield is on its way to a fourth consecutive
decline after reaching 4.01 percent last Thursday, its highest
since mid October.
Many debt securities, including mortgage loans, are
benchmarked against Treasury yields, so the quick rise in
yields over the last month have investors spooked about the
viability of the fragile recovery.
(Additional reporting by Denny Thomas in SYDNEY; Editing by
Kazunori Takada)
