US dollar and the yen rose against the euro on Friday, underpinned by safe-haven bids amid a deteriorating global economic outlook and losses on Wall Street. The moves partly reversed losses in the previous session triggered by a more than 6 percent jump in US stocks.
Currency traders have closely watched equity performance for direction in recent weeks, with rising share prices boosting risk appetite and hurting demand for the dollar and the yen. As leaders of the G20 major industrial and emerging nations gather in Washington on Friday and Saturday, analysts said deleveraging and risk aversion would likely continue to dominate sentiment, with markets wary on prospects for the event to yield any major changes.
"Today is probably a little bit of a consolidation after the extreme volatility that we saw yesterday," said Robert Blake, senior currency strategist at State Street Global Markets in Boston. "People are going to wait on the sidelines and see what comes out of (the G20 meeting) before they start to take a view with respect to what's going on next week," he added. "Generally speaking, we would be hesitant to say this is the bottom for sentiment."
In late trading in New York, the euro was 0.8 percent lower on the day at $1.2729, though well off the two-week low of $1.2387 touched on Thursday. The European currency also struggled against the low-risk, low-yielding yen, falling 0.7 percent to 123.96 yen.
Against the yen, the dollar fell 0.2 percent to 97.41 yen. The yen has gained about 0.8 percent against the dollar and 1.1 percent versus the euro this week at current prices as ongoing worries about the global economy and credit markets prompted investors to unwind positions funded by cheap borrowing in the Japanese currency.
The dollar remained supported despite data showing sales at US retailers suffered a record decline in October. A separate report showed US consumer confidence rose unexpectedly in November but remained at depressed levels. Federal Reserve Chairman Ben Bernanke said on Friday financial markets are under severe stress and central bankers around the world are ready to do more to ease credit strains and support faltering economic growth.
Fears of a severe global economic slump were heightened this week after new data confirmed recession in Europe. Chinese growth is also showing signs of slowing, prompting Beijing to unveil a massive multibillion-dollar stimulus package.
Figures earlier in the day showed France managed to eke out positive growth in the third quarter, but separate data put the euro area in its first-ever recession after German growth data on Thursday confirmed two consecutive quarters of contraction.
The euro zone economy contracted 0.2 percent for the second time in a row quarter-on-quarter in the July-September period, an official estimate showed. Despite weak euro zone data, the euro continued to hover near a record high against sterling hit the previous day as investors are convinced a recession in the UK will be more severe than in the euro zone. The pair traded at 85.54 pence, still near an all-time high of 86.62 pence, according to Reuters data. Sterling did manage to gain against the dollar, rising 0.2 percent to $1.4881, a few cents from the 6-1/2-year low against the dollar of $1.4555 touched on Thursday.