NEW YORK, Aug 25: The US dollar was down against the yen on Monday, dropping as US financial shares dragged equity markets lower on persistent credit concerns, which prompted investors to reduce risk.

The decline in the attractiveness of US assets reduced demand for the dollars to buy them while simultaneously pushing investors into investments perceived as less risky, such as the yen.

Intra-day gains in the dollar on a better-than-expected US existing-home sales report tended to be short lived even though a recovery, or at least stabilisation, in the US housing market is seen as critical to ending some of the concern on the US economy.

In thin trade on the back of a UK public holiday, the euro was last down 0.1 per cent at $1.4779 and down 0.7 per cent at 161.68 yen, while the dollar eased 0.6 per cent at 109.41 yen.

The dollar index, measuring the US unit’s value versus a basket of six major currencies, was 0.1 per cent lower at 76.704.

The euro was little changed after a G20 finance official told Reuters the International Monetary Fund has cut its 2008 growth estimate for the eurozone to 1.4 per cent from 1.7 per cent.

The IMF forecast for 2009 was revised to 0.9 per cent versus 1.2 per cent, the source said.

The British pound earlier hit two-year lows against the dollar on Monday, with stalled UK growth seen as another example of growing economic malaise outside the United States.

The pound later recovered but its general weakness helped the dollar against some currencies including the euro.

Sterling bounced up 0.1 per cent to $1.85462 midway through the New York session, having fallen as low as $1.8407 earlier -- its lowest since July 2006, according to Reuters data. The pound is down 6.6 per cent against the dollar in 2008, the largest drop of any major currency other than the New Zealand dollar.—Reuters