* 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 (Reuters) - 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 Ukrainian airspace.
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 Russia’s border.
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 the day.
“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)