NEW YORK, Aug 25: The dollar fell against the euro on Friday while the yen weakened further as many investors switched back into risk-taking mode amid calmer global financial markets.

The euro surged as high as 1.3681 dollars -- a high point last seen on August 13 -- before settling at $1.3677 at 2100 GMT. That compared with $1.3566 in New York late on Thursday.

The dollar rose to 116.41 yen, from 116.28 yen on Thursday.

The euro maintained its level despite reports showing better than expected US new home sales and durable goods orders.

Analysts said the data has yet to take into account the recent credit troubles, and so worse surveys could come later this year as lending standards tighten and mortgage rates rise.

It is important to remember that these numbers reflect pre-credit crunch conditions, said Adam York at Wachovia.

Analysts said a rebound in troubled stock markets encouraged traders to resume so-called carry trades, which involve selling of low-yielding currencies such as the yen for higher returns.

The US dollar posted its strongest losses on the week, as a sharp return to carry trades led the safe-haven currency lower against risk-friendly counterparts, said David Rodriguez at Forex Capital Markets.

Recent stock market turmoil saw the euro fall as low as $1.3360 last week as the dollar drew strength from its status as a safe haven in times of global financial uncertainty.

However, this week’s modest recovery in equities has pushed the dollar lower, dealers said.

Stability has returned momentarily to the market with investors taking a breather while regaining some of their appetite for risk, said Kazuhiko Shibata, Tokyo branch manager at Dresdner Bank.

Analysts also pointed out that both the euro and the pound have maintained their strength because expectations still stand that both European Central Bank and the Bank of England could raise interest rates again this year.

Global markets have taken a beating this month on fears that damage from default US “subprime” mortgages -- loans to customers with patchy credit histories — will disrupt lending by banks.

In late New York trade, the dollar stood at 1.2007 Swiss francs from 1.2069 Thursday.—AFP