* Dollar falls vs euro, yen as stocks recover on Citi report
* US stocks futures rise as report eases risk aversion
* Citi <C.N> in talks which may see govt take 40 pct - WSJ
By Shinichi Saoshiro
TOKYO, Feb 23 (Reuters) - The dollar slipped against the euro
and the yen on Monday as investor aversion towards risk eased
slightly on a report that Citigroup <C.N> was in talks that could
see the U.S. government take a large chunk of the struggling
lender's common stock.
The Wall Street Journal, citing sources familiar with the
plan, said the government could end up owning as much as 40
percent of the ailing financial giant while Citi executives hope
to limit the government's stake to closer to 25 percent.
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The dollar, which last week rallied to a three-month high
against the euro and a six-week peak versus the yen on risk
aversion, retreated on the report while U.S. equity futures
turned positive and U.S. Treasuries fell.
"It's complicated but the Wall Street Journal article is
probably supportive for the stock market and introducing risk
seeking," said a senior currency trader at a European bank.
Analysts suggested the dollar's slide on Monday was a further
indication that the greenback's recent bull run may be stalling.
The dollar fell across the board on Friday amid uncertainty
over nationalisation of U.S. banks, with a steep Wall Street
decline failing to sustain safety buying of the greenback.
"The dollar is continuing lower from Friday, although it
should have been favoured as a safe haven," said Tohru Sasaki,
chief FX strategist at JP Morgan in Tokyo.
"With the (March) fiscal year-end nearing, there are
participants needing to lighten their long dollar positions and
the report was a good excuse to sell," Sasaki said.
The dollar index <.DXY>, which measures the greenback's
performance against a basket of major currencies, fell to its
lowest in over a week.
The euro was up 0.4 percent at $1.2887 <EUR=> after climbing
to $1.2950 <EUR=>, its highest in nearly two weeks.
EURO SUPPORT
The yen gained against the dollar after falling last week,
when the deteriorating economic and political outlook damaged its
perceived safe-haven status.
The U.S. currency eased 0.1 percent to 93.00 yen <JPY=> after
shedding more than 1 percent on Friday.
But the euro was up 0.2 percent at 119.85 yen <EURJPY=R>
after hitting a one-month high of 120.47 yen on trading platform
EBS.
In addition to the slight improvement in investor risk
appetite, hopes for a plan that would help the weakest euro zone
economies also lent the euro support.
On Friday, Germany's foreign minister said authorities were
considering how financially strong euro zone economies could aid
weaker members.
Sterling and the Australian and New Zealand dollars,
perceived as higher-yielding currencies that fall at times of
market stress, all gained against the dollar on Monday.
Sterling rose 0.5 percent to $1.4507 <GBP=>, and the Aussie
climbed 0.5 percent to $0.6488 <AUD=>. The kiwi advanced 0.2
percent to $0.5124 <NZD=>.
Mitul Kotecha, global head of FX strategy at Calyon in Hong
Kong, cautioned that underlying risk aversion hadn't disappeared.
"We doubt that the dollar sell-off overnight will be
sustained and the currency is likely to remain a beneficiary as
risk aversion rises once again," he said.
(Additional reporting by Charlotte Cooper; Editing by Brent
Kininmont)
