(Recasts, adds fresh quotes)
* Yen hits 5-month high versus euro
* Swiss franc also firmer against euro and dollar
* European stocks in the red, German bund yields fall
By Anirban Nag
LONDON, July 17 (Reuters) - The yen hit a five-month high against the euro on Thursday on renewed safe-haven inflows as the West imposed further sanctions against Russia, which weighed on global risk sentiment.
European stocks started in the red, while safe-haven German bunds were in demand as the United States placed sanctions on some of Russia’s most prominent companies including its biggest oil group and largest independent natural gas producer.
The dollar fell 0.2 percent against the yen to 101.45 yen while the euro weakened to 137.22 yen, its lowest since early February. The safe-haven Swiss franc was also firmer, with the dollar down 0.1 percent against the franc at 0.8976 francs.
“There is a worsening of risk sentiment linked to the events in Russia that is driving up the yen,” said Yujiro Goto, currency analyst at Nomura.
“Also dollar/yen has been rising in the past few days, so we are seeing some unwinding of those positions. There should be good support at 101.20 for dollar/yen.”
The dollar index, which measures its performance against a basket of currencies, was down 0.1 percent at 80.478, having hit a one-month high on Wednesday. It had risen on market speculation that Federal Reserve chair Janet Yellen is leaning towards tightening monetary policy.
But U.S. yields fell on Thursday, dragging the dollar down with it.
The euro was steady against the dollar at $1.3530, recovering from a one-month low of $1.35205 hit earlier in the session. Traders said a break of an important support at $1.35 could cause a wave of selling.
“Recent German economic data is not that strong and some ECB policymakers are showing concerns on the threat of deflation. The difference in monetary policy stance (between the ECB and other major central banks) is hurting the euro,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.
The U.S. dollar underperformed its Canadian peer after the Bank of Canada was neutral on the next move for interest rates. Some in the market had wagered the central bank would go all the way and adopt an easing bias.
The dollar eased to C$1.0728, from a three-week high of C$1.0795.
The New Zealand dollar continued to struggle after benign local inflation data on Wednesday raised questions about whether the Reserve Bank of New Zealand will continue to tighten much more this year. The kiwi last traded at $0.8692, not far from a three-week low at $0.8690. (additional reporting by Hideyuki Sano in TOKYO; Editing by Janet Lawrence)