* Dollar climbs to 8-week high versus yen
* Oil prices reverse earlier highs
* World stocks flat, U.S. stocks down on energy weakness
(Updates prices, adds details, comment)
By Wanfeng Zhou
NEW YORK, Feb 15 (Reuters) - Oil prices fell on Tuesday as
fears eased over Middle East unrest and on uncertainty over
China's monetary policy to fight inflation, while the U.S.
dollar climbed to an eight-week high versus the yen.
While protests in Iran and other Middle East countries
remained a concern, analysts looked for some unwinding of the
geopolitical fear premium that emerged during Egypt's protests.
For details, see []
Weakness in crude weighed on energy shares, dragging major
U.S. stock indexes <><.SPX> lower. World stocks, as
measured by the MSCI world stocks index <.MIWD00000PUS> dipped
0.2 percent, but held near last week's 30-month highs.
"I see the dollar's move up from earlier lows pulling down
NYMEX crude futures," said Chris Dillman, analyst at Tradition
Energy in Stamford, Connecticut.
Brent crude for April delivery <LCOc1> dropped 1.6 percent
to $101.53 a barrel, while U.S. crude oil for March delivery
<CLc1> dropped 0.7 percent to $84.20.
The dollar climbed as high as 83.93 yen <JPY=EBS> on
trading platform EBS, the highest level since mid-December, and
was last up 0.6 percent at 83.80 yen.
U.S. two-year Treasury notes <US2YT=RR> yields briefly
reached around 0.89 percent, their highest level since last
May. Higher Treasury yields have pushed the dollar up more than
2 percent versus the yen over the last two weeks.
"If the upswing in Treasury yields continues, it is not
unreasonable that we see further upside for the dollar against
the yen," said David Watt, senior currency strategist at RBC
Capital Markets in Toronto. "If risk appetites improve, that
will also present further downside for the yen."
Stocks were under pressure after data showed sales at U.S.
retailers rose less than forecast in January and as energy
shares pulled back, creating a breather in the market's recent
rally.
Despite the softer-than-expected reading, economists said
the underlying trend of improved spending remained intact.
[]
"The softer data will see the growth bulls marginally lower
forecasts for first-quarter retail activity, but the market
impact will be softened as economists give room for a rebound
after weather improves, said Avery Shenfeld, CIBC chief
economist in Toronto.
In mid-afternoon trading, the Dow Jones industrial average
<> dropped 66.90 points, or 0.55 percent, at 12,201.29. The
Standard & Poor's 500 Index <.SPX> was down 6.62 points, or
0.50 percent, at 1,325.70. The Nasdaq Composite Index <>
was off 14.12 points, or 0.50 percent, at 2,803.06.
EURO STRENGTH
The dollar slipped versus the euro <EUR=EBS>, which was
boosted by demand from Middle East and Asian investors.
Europe moved closer to a deal on tackling its debt crisis
on Tuesday, and officials said there would be additional
meetings to try to reach an accord. []
Debt issued by the euro zone's heavily indebted countries,
however, remained under pressure. Uncertainty over a rescue
package has seen spreads between peripheral nation bond yields
and German benchmarks widen in recent days.
The euro zone ended last year with stable economic growth,
but disappointed those hoping for a faster recovery as
expansion in the three largest nations fell short of forecasts,
and Greece and Portugal contracted. But German data and a
sentiment indicator suggested the country's economic recovery
remained on track.
Data overnight showed Chinese inflation came in lower than
expected at 4.9 percent in the year to January, but price
pressures excluding food were their strongest in at least a
decade and could force the central bank to keep tightening
monetary policy. []
Inflationary pressures, particularly in emerging markets,
have been part of the motivation this year for investors to
move into developed stock markets.
Japan's Nikkei <> stock index logged a 10-month
closing high, ending up 0.2 percent. European shares <>
hit a fresh 29-month closing high, as Barclays Plc <BARC.L> led
the banking sector up on forecast-beating profit.
(Additional reporting by Edward Krudy in New York and Jeremy
Gaunt and Claire Milhench in London; editing by Jeffrey
Benkoe)
