FOREX-Dollar slides as Russia shifts currency view

* Russia stresses need for new reserve currency

* Markets focus on BRIC summit after Russia comments

* BRIC draft communique does not mention dollar

* U.S. data shows higher housing starts, muted inflation (Adds comment, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, June 16 (Reuters) - The dollar slid across the board on Tuesday, pressured by comments from Russia suggesting a need for a global reserve currency other than the greenback.

Data showing a rebound in U.S. housing starts and an unexpectedly small rise in producer prices also weighed, reducing safe-haven demand for dollars as investors snapped up higher-yielding currencies such as the Australian dollar.

But Russia's dollar-negative comments dominated the market, a day after the country's finance minister backed the greenback's role as the world's reserve currency. For more see [ID:nLG426293].

"Clearly the largest holders of U.S. Treasuries are increasingly nervous about the fiscal stability of the U.S. going forward," said Omer Esiner, senior currency analyst at Travelex Global Business Payments in Washington. "That said, I don't think it's to anybody's interest to see a run on the dollar."

In midday New York trading, the euro traded 0.8 percent higher at $1.3901 EUR=EBS on electronic trading platform EBS, after climbing as high as $1.3934 following the U.S. housing data.

The euro had gained after German think-tank ZEW said its economic sentiment index surged to 44.8 in June from 31.1 in May, exceeding expectations for a reading of 35.0 and suggesting market optimism for a recovery this year. [ID:nLG831670]

The dollar fell more than 1 percent against the yen to 96.32 JPY=EBS, on pace for its largest one-day fall in more than two weeks.

The ICE Futures' dollar index .DXY dropped 0.9 percent to 80.402.

FOCUS ON BRIC

With the data out of the way, traders focused on Tuesday's summit of Brazil, Russia, India and China -- known as the BRIC group -- in Russia, amid rising market speculation they may be looking to diversify reserve portfolios that contain hefty amounts of U.S. assets.

The first summit of the world's biggest emerging economies will confront the failures of the global financial system and could discuss ways to reduce the dominance of the U.S. dollar.

"The existing set of reserve currencies, including the U.S. dollar, have failed to perform their functions," Russian President Dmitry Medvedev told a news conference in the Russian city of Yekaterinburg ahead of the summit.

"We will not do without additional reserve currencies," he said, adding that a new supranational reserve currency was also an option as the International Monetary Fund's Special Drawing Rights gained a bigger role.

Russian Finance Minister Alexei Kudrin at the weekend had said the dollar's status as the world's main reserve currency was unlikely to change in the near term, clouding the market's understanding of Moscow's position.

"The interest in reserve diversification reflects less a desire for 'more reserve currencies to invest in,' and more a desire to transfer foreign exchange risk to someone else," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

"If this can be accomplished at little cost or no cost by convincing the world that it needs to reduce its reliance on the U.S. dollar, then all the better."

The BRIC leaders are seeking to use their economic clout to get a bigger say in how the world's financial system is run.

Interestingly, a draft communique from the summit did not mention the U.S. dollar or even a supranational reserve currency, sources knowledgeable of the draft told Reuters. The draft statement called for a "diversified, stable and predictable currency system" as well as a bigger role by emerging economies in international financial institutions. For story, click on [ID:nLG674351]. (Editing by Leslie Adler)