* Libya violence fuels risk aversion
* Euro briefly rises above $1.37 then retreats
* New Zealand dollar suffers after earthquake
(Updates prices, adds quotes, changes byline)
By Wanfeng Zhou
NEW YORK, Feb 22 (Reuters) - The Swiss franc and yen rose
on Tuesday as a revolt in Libya stoked safe-haven demand, and
fears of escalating unrest in the Middle East and Africa could
spark further gains in these currencies.
Stocks tumbled worldwide as oil <LCOc1> <CLc1> soared and
investors shunned riskier assets after Muammar Gaddafi vowed to
die in Libya as a martyr and said he would crush a revolt that
has seen eastern regions already break free from his rule. For
details see [].
The Swiss currency rallied about 1 percent versus both the
euro and U.S. dollar. The euro, which tends to weaken when risk
aversion rises, was down only modestly against the dollar after
comments from European Central Bank officials boosted
expectations for euro zone interest rate hikes.
"Libya is the obvious theme today, so you have a little bit
of safe-haven trading," said Fabian Eliasson, vice president of
currency sales at Mizuho Corporate Bank in New York.
"The initial reaction was to go to Swiss and yen," he said.
"But we need to see how this plays out in the coming days."
The euro <EURCHF=EBS> last traded down 1 percent at 1.2816
francs, after dropping as low as 1.2792 francs, its weakest
since late January.
The dollar fell 1 percent to 0.9375 franc <CHF=EBS>, having
earlier dropped to 0.9367 franc, the weakest since Feb. 2.
The euro was last down 0.1 percent at $1.3661 <EUR=EBS>,
after briefly rising as high as $1.3704. The next upside target
is $1.3745, the high reached on Feb. 9.
ECB policymaker Yves Mersch was quoted as saying the
central bank may sharpen its language on inflation, while
fellow ECB policymaker Nout Wellink was quoted expressing
concerns about inflation. [] and []
Expectations the ECB would raise rates before the Federal
Reserve have pushed the euro up 2 percent versus the dollar so
far this year, though some analysts remain cautious.
"Rising rate expectations will only help the euro to the
extent that it is not seen disrupting the credit environment in
Europe," BNP Paribas wrote in a note.
The New Zealand dollar <<NZD=D4> tumbled to US$0.7455, its
weakest since late December, after a strong earthquake rocked
Christchurch, the country's second biggest city.
[] Concerns about the economic damage spurred
speculation of an interest rate cut. []
The Australian dollar <AUD=D4> dropped 1.2 percent to
$0.9975.
Higher oil prices are seen weighing on global growth,
particularly in emerging countries heavily dependent on oil and
commodity imports. Rising prices have already led to higher
inflation, which can threaten vulnerable economies.
Against the yen, the dollar fell 0.5 percent to 82.68
<JPY=EBS> after safe-haven flows pushed Treasury yields sharply
lower.
Falling yields decrease the appeal of dollar-denominated
assets. The relationship between dollar/yen and U.S. yields has
come back into play in recent weeks, strategists said.
The euro lost 0.6 percent to 112.99 yen <EURJPY=>.
(Additional reporting by Julie Haviv; Editing by James
Dalgleish)
