Australia shares dragged lower by iron ore, retailer Myer slumps

* ASX 200 slips 0.2 percent with 68 shares higher, 116 shares lower, 16 shares unchanged

* Myer slumps 8.5 percent after disappointing profit

* Companies with U.S. exposure buoys market on weak Aussie (Adds analysis, quotes, stocks on the move)

By Thuy Ong and Gyles Beckford

SYDNEY/WELLINGTON, Sept 11 (Reuters) - Australian shares reversed early gains to slip 0.2 percent on Thursday as weakness among miners, while investors dumped retailer Myer Holdings Ltd after a disappointing earnings report.

But, with the Aussie dollar weakening, stocks in companies who receive a large portion of their revenues in U.S. dollars helped shore up the market.

Myer dropped 8.5 pecent to trade at six-week lows after the department store operator posted a 22.6 percent fall in annual profit.

Stocks in the resources space suffered as spot iron ore prices fell to a fresh 5-year low on Wednesday due to a supply glut. Global iron ore miner BHP Billiton Ltd dipped 0.6 percent, and Fortescue Metals Group Ltd lost 2 percent.

The S&P/ASX 200 index declined 9.2 points to 5,565.1 by 0258 GMT, its second session of losses. The benchmark had its worst day in a month on Wednesday, losing 0.6 percent.

The benchmark index had struck a six-year peak of 5,679.5 on Aug. 21, but since then the market has fallen to 3-1/2 week lows on global growth worries, geopolitical tensions and weak iron ore prices.

"We're very bearish on the whole iron ore space," said Shawn Hickman, managing director at Market Matters in Sydney. "With the exception of any companies with U.S. earnings, the market looks very, very heavy."

Stocks exposed to U.S. markets climbed higher as the Australian dollar hovered around five-month lows of $0.9183 against the U.S. dollar.

Among these, QBE Insurance Ltd (Other OTC: QBEIF - news) jumped 2.8 percent to a five-month high of A$12.10, blood products maker CSL Ltd (Other OTC: CMXHF - news) climbed 1.2 percent, while pallet-maker Brambles Ltd gained 1.5 percent.

Elsewhere, Australian employment surged by 121,000 in August, far beyond forecasts in the biggest rise in at least three decades.

Training and workforce company Vocation Ltd dropped 4.1 percent after saying it has sucessfully completed its institutional placement to raise A$74 million with new shares issued at a price of A$3.05, a 7.9 percent discount to its close of A$3.31 on September 9.

New Zealand's benchmark NZX 50 index added 0.3 percent, or 18.2 points, to 5,254.9.

Power stocks look to extend a bull run on expectations that opposition political parties proposing regulation of the sector won't win power at next week's general election. Contact Energy (NZSE: CEN.NZ - news) added 1.2 percent to NZ$5.72, and Meridian Energy jumped 3.3 percent to NZ$1.395. (Reporting by Thuy Ong; Editing by Simon Cameron-Moore)