LONDON, Oct 22: The dollar recovered lost ground in late European trade on Monday as nervous investors looked to the traditional safe haven of the US unit in the face of heavy stock market losses, dealers said.They said that after a sharp downturn on Friday on Wall Street and a Group of Seven finance ministers meeting which produced no lead, the euro chalked up fresh record highs against the dollar at 1.4347 earlier in the day.

However, US stocks steadied later on Monday and this may have helped investor nerves amid growing concerns about the challenges facing the US economy.Elsewhere, the yen reached a three-week high against the euro and six-week top versus the dollar as the Japanese unit also benefited from the flight to safety.In late European trade, the euro was quoted at $1.4137, down sharply from its record high earlier in the day.The yen was at 114.07 to the dollar, up from 114.53, and at 161.22 to the euro, up from 163.79.The euro shot higher in Asian trade after G7 world finance chiefs did not voice concern about currencies at their meeting on Friday, which dealers took as a reason to drive the dollar down to fresh lows.“The G7 in effect gave a green light to further weakness in the US dollar by not referring to the currency in their communique,” said Geoffrey Yu, currency analyst at UBS.There had been some concern that European politicians might have pushed for steps to try to prop up the dollar given the negative impact of a stronger euro on eurozone exporters.

But the finance chiefs only reiterated that exchange rates “should reflect economic fundamentals” and that excess volatility is undesirable for economic growth.Dealers said the gains in the dollar could prove short-lived.“Apart from safe haven flows, the dollar is unlikely to find support this week as the cyclical data should remain weak and the market is likely to revise the probability of a US recession upwards,” said Niels, currency strategist at Dresdner Kleinwort.While no major data is scheduled for Monday, US existing and new home sales due out on Wednesday and Thursday, respectively, are expected to show the housing market continuing to falter.

Until then, currencies are likely to be driven by events in the equity markets, dealers said.World stock markets spiralled lower on Monday as Asia and Europe took their cue from a pre-weekend Wall Street slump sparked by fresh concerns over the US economic outlook, the persistent credit squeeze and record high oil prices.In late European trade on Monday, the euro was at 0.6974 pounds against 0.6963 pounds on Friday and at 1.6651 Swiss Francs after 1.6709.The dollar stood at 1.1777 Swiss Francs, up from 1.1726.The pound was down at $2.0270 from $2.0470.In London, the price of gold was $751.25 per ounce, short of Friday’s $763.—AFP