GLOBAL MARKETS-Yen climbs as Asian stocks extend sell-off

SINGAPORE, Mar 5 (Reuters) Asia's battered stock markets fell again on Monday, extending a global sell-off that began last week, with Japanese shares sliding more than 2 percent as a surging yen hammered exporters such as Canon Inc.

The yen hit three-month highs against the dollar and the euro as investors rushed to close out risky trades and pay off the cheap yen loans that financed them, driving the Japanese currency higher.

''Today is going to hurt. There really aren't any reasons to buy at all,'' said Shinji Igarashi, equity manager at the sales department of Chuo Securities.

Share markets in Australia, Hong Kong, South Korea and Taiwan fell between 1.4 and 1.8 percent. Singapore's main index shed 2.6 percent.

A near 9 percent slump in China's main stock index last Tuesday, combined with worries about the outlook for the U.S.

economy, sparked a wave a selling in world equity markets, many of which had been trading around record highs.

''The events of last week have certainly brought to the attention of many market participants the vulnerability of the market when it rallies too quickly, too soon,'' said Jamie Spiteri, senior dealer at Shaw Stockbroking in Australia.

Fears about the health of the global economy knocked more than 1 percent off oil prices, while Japanese government bond prices rose, following a rally in U.S. Treasuries as investors fled stocks in search of safer assets.

The yen rose across the board, with sterling plunging as much as 2 percent to around 222.50 yen as market players unwound bets against the Japanese currency.

The so-called carry trade, in which investors fund the purchase of higher-yielding -- and riskier -- assets with borrowing in the low-yielding yen, had driven the yen to a four-year low against the dollar in late January.

The dollar tumbled to a three-month low at 115.47 yen, before trimming losses to trade around 115.90 yen by 0210 GMT.

The euro bought around 152.10 having fallen to a three-month low of 151.99 yen on electronic trading platform EBS.

''Prices in global equity markets are still shaky and the market is still jittery about how they will stabilise,'' said Nobuo Ibaraki, a deputy general manager of FX at Nomura Trust bank. ''The dollar has a chance to fall below 115 yen.'' BIGGEST FACTOR Tokyo's Nikkei fell below 17,000 for the first time in nearly two months, ending morning trade down 2.2 percent.

''The biggest factor is the closing out of the yen carry trade,'' said Kenichi Hirano, operating officer at Tachibana Securities.

''Hedge fund managers and speculators who have bought stocks using the carry trade ... have to sell those stocks in order to close out their currency positions.'' Cameras and copiers maker Canon dropped 2.1 percent, car maker Toyota Motor Corp. fell 2.7 percent and Sony Corp. shed 1.4 percent. A stronger yen tends to hurt exporters because it erodes the value of their overseas sales.

MSCI's broadest index of Asian shares outside Japan was down 0.5 percent at 0210 GMT.

China's benchmark index bucked the regional trend, rising around 0.9 percent as the country's parliament began its annual session, with officials stressing the need to develop capital markets.

U.S. stock fell on Friday, capping their worst week in more than four years. The Dow Jones industrial average lost 1 percent and the Nasdaq Composite Index shed 1.5 percent.

In the Japanese Government Bond market, lead March futures were up 0.26 point at 135.08, climbing towards a three-month high of 135.44 hit last week. The benchmark 10-year yield fell 3 basis points to 1.635 percent.

''A growing view that recent falls in share prices may not be just a temporary correction is giving the JGB market support,'' said Masuhisa Kobayashi, chief JGB strategist at Barclays Capital.

U.S. crude fell 74 cents to .90 a barrel, extending Friday's 36-cent decline, as oil, which shrugged off the turmoil in other markets to rise half a dollar last week, appeared to be succumbing to the global flight from risk.

''Investors were cautiously hoping for the equities markets to steady this week but the Asian markets have continued to fall, so that's making people nervous,'' said Dariusz Kowalczyk, an analyst at Hong-Kong based CFC Seymour Ltd.

Gold eased to around 0.40 an ounce, after sliding nearly 3 percent on Friday, when currency investors sold the precious metal to pay for losses in other markets.

Reuters AKJ DB0844