* Russia's rouble sinks after sanctions, airliner crash
* Yen hits five-month high against euro
* Dip in U.S. Treasury yields drags on dollar
(Adds rouble drop, quotes; updates prices)
By Michael Connor
NEW YORK, July 17 Russia's rouble tumbled against the dollar on
Thursday, but the greenback eased amid a global scramble to defensive assets by
investors spooked by news a Malaysian passenger jet had been brought own in
A Malaysia Airlines plane crashed in eastern Ukraine on Thursday, killing
all 295 people aboard and sharply raising the stakes in a conflict between Kiev
and pro-Moscow rebels in which Russia and the West back opposing sides.
Before news of the disaster, investors had already boosted the Japanese yen
to a five-month high against the euro after the West imposed more economic
sanctions on Russia.
An index that measures the dollar against a basket of six other leading
currencies traded tightly throughout the day and last was off 0.05
percent at 80.517, but still near a one-month high touched on Wednesday.
Against the rouble, however, the dollar was up 1.8 percent. Most of
the gains came after the reported crash of the Malaysia Airlines plane near
The dollar touched a low of 34.56 roubles, marking the Russian currency's
biggest single-day drop since June 2013, and last traded at 35.18 roubles.
"It's weaker in terms of the price in response to the unfortunate airline
news," said Shaun Osborne, currency strategist at TD Securities in Toronto.
The dollar was also hurt by a fall in U.S. Treasury yields. It was off 0.02
percent against the euro. Against the yen, the dollar was down 0.4
percent at 101.28 yen.
The euro weakened against the yen to a nadir of 136.93 yen, its
lowest since early February, and last traded at 136.87 yen, off 0.40 percent on
"We are not seeing a whole lot of movement. The movements we are seeing is
certainly less than half a percent and ... that's really not much of a response
to what's going on," Osborne added. "It's still a 'low volatility, low
conviction,' sort of environment."
Treasury yields, which are a key attraction for dollar buyers, fell on
Thursday, with the yield on the U.S. benchmark 10-year Treasury note
dropping to 2.47 percent as safety bids lifted its price by 18/32.
U.S. economic data, showing jobless claims diminishing and housing starts
sinking 9.3 percent, also helped lift Treasuries.
"The bond market was rallying before the data, and (the data) has given a
little bit more substance to the ... rally," said Deutsche Bank currency
strategist Alan Ruskin.
European stocks were in the red while German Bunds, another
safe-haven asset in times of turmoil, were in demand as the United States
slapped sanctions on some major Russian companies including its biggest oil
group and largest independent natural gas producer.
(Reporting by Michael Connor; Additional reporting by Anirban Nag in London and
Hideyuki Sano in Tokyo; Editing by James Dalgleish and G Crosse)