* Dollar index down 0.2 percent at 79.623
* Sterling jumps to 8-month high vs dollar
* Moves exacerbated by month-end, qtr-end flows
By Tamawa Desai
LONDON, June 30 (Reuters) - The dollar slipped against a basket of currencies on Tuesday as risk sentiment improved on expectations the global economy and financial system were stabilising from its worst crisis in decades.
Such views were reflected as Wall Street's so-called fear gauge, the CBOE Volatility Index, dipped to its lowest level since just before Lehman Brothers collapsed last September.
"Broader stability is helping to support gains in risk assets," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
Sterling jumped to an eight-month high against the dollar, breaking above its previous high hit earlier this month after data showed British house prices rose for the second month running in June.
Month-end and quarterly end flows were exacerbating the moves, analysts added.
By 0821 GMT, the dollar index, which measures the dollar against a basket of six currencies, fell 0.2 percent to 79.623.
Sterling rose to around $1.6745, the highest since last October, according to Reuters data.
The MSCI global stocks index was on course for its best quarter since its launch in 1988, up some 22.5 percent.
Analysts said massive fiscal outlays and steps to bolster commercial banks, and efforts by central banks to pump massive liquidity into the banking system were finally taking hold.
"These monumental efforts appear to be paying off as confidence has improved, data releases especially in Q2 09 have revealed a much smaller pace of deterioration," said analysts at Calyon in a note.
"Risk appetite is set to improve further in H2 2009 but as with economic recovery, the improvement will be gradual and prone to set backs," it added.
The euro was up 0.2 percent at $1.4111 while the dollar was down 0.6 percent against the yen at 95.53 yen.
Data on Tuesday showed money supply growth slowed to 3.7 percent in May from a year ago, from 4.9 in April and below forecasts for 4.6 percent.
Currencies of commodity producers such as the Australian dollar rose as oil prices surged above $73 per barrel to hover near an eight-month high.