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Dollar, yen gain as investors seek refuge

NEW YORK- The dollar and yen firmed as the euro came under pressure Friday with investors seeking a safe haven from the growing financial market storm.

The euro at 2100 GMT was at 1.3394 dollars against 1.3590 late Thursday in New York.

The dollar was meanwhile trading at 100.51 yen after 99.50 on Thursday.

With stock markets collapsing around the world, as frightened investors bail out of equities in the midst of the worst financial crisis since the Great Depression, the dollar is seen as a refuge against chaos.

"It is difficult for anyone to miss the massive wave of risk aversion that has washed over the global markets these past two weeks," said John Kicklighter at Forex Capital Management.

"With basic lending and borrowing (the lifeblood of the financial system) frozen by oppressively high rates, the markets are being held hostage by sentiment; and until pessimism eases, the risk-related assets will maintain their bearish trajectories."

European share prices fell hard on Friday, in line with big losses on Wall Street, which reassuring remarks from President George W. Bush were unable to prevent.

Bush in an eight-minute speech sought to break a cycle of "uncertainty and fear" he blamed for aggravating the global financial meltdown, insisting US authorities can and will end the crisis.

But he offered no new remedies for the economic bloodbath, warning a fearful US public and jittery markets that "anxiety can feed anxiety," which can obscure efforts that have been made to end the crisis.

The problems in emerging markets also led to higher demand for dollars.

Martin Soler Garcia at Economy.com said Brazilians were scurrying for greenbacks as the local stock market plunged.

"Investors continue to trade in Brazilian currency for dollars, sending the real plummeting and increasing Brazilian firms' dollar-denominated debt," he said.

"The central bank of Brazil and the finance ministry sold dollars on the open market to keep the value of the real from plummeting and set up a fund to make short-term loans to cash-strapped firms."

The dollar on Friday was also supported by fresh falls in the price of oil to below 80 dollars a barrel and by news that the US trade deficit narrowed 3.5 percent in August to 59.1 billion dollars, reflecting a drop in imports and weaker oil rates.

In late New York trade, the dollar stood at 1.1376 Swiss francs from 1.1289 Thursday.

The pound was at 1.7051 dollars after 1.7080.