Dollar mixed as jitters persist

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NEW YORK (CNNMoney.com) -- The dollar was mixed against major currencies Friday as investors remain risk-averse amid global economic uncertainty.

On Friday, stocks rallied following Thursday's plunge that pushed indexes to multiyear lows.

Investors have little tolerance for loss, and are turning to the perceived safety of U.S. Treasurys, which can only be purchased in dollars, said Antonio Sousa, chief strategist at DailyFX.com. That shift has also been lending strength to the greenback, he said.

Yields for the 2-year, 10-year and 30-year government bonds all fell Thursday to the lowest levels since the Federal Reserve began keeping records in 1962.

The yield on the 3-month Treasury bill, closely watched as an immediate reading on investor confidence, edged up to 0.07% Friday. But on Thursday, the 3-month fell to 0.02%, near the 0% level reached at the height of the financial crisis.

"Investors and traders are becoming very pessimistic about the world economy for 2009. There are more job losses, and people are worried about having demand for products next year," he said.

In this environment, "the dollar is still the favorite reserve currency, [considered] the equivalent of cash [while] the euro and sterling, they're seen as more like an investment," Sousa said.

On Friday, the dollar slipped against the 15-nation euro, which rose slightly to $1.2580 from $1.2507 late Thursday. The greenback also edged down versus the British pound, which increased to $1.4864 from $1.4783.

Since the failure of Lehman Brothers (LEHMQ) on Sept. 15, the dollar has gained roughly 10% against the euro and about 17% against the pound, but it has lost about 8.5% against the yen.

On Friday, the U.S. currency rose against the Japanese yen, to ¥95.93 from ¥94.52 late Thursday.

Although the dollar edged higher versus the yen Friday, Sousa expects the dollar to resume losing ground against the Japanese currency.

Sousa explained the yen's recent strength as a factor of investors borrowing yen over the past 10 years in order to buy assets, often in the U.S., that provided a higher return. As those assets, which include real estate, have fallen in value, investors have had to pay back the money to Japan.

"You just have to pay back the money you borrowed over the past 10 years," which has been driving the dollar lower versus the yen, Sousa said.

While there were no big economic reports Friday, this week did bring a slew of dour data adding to investor anxiety.

The number of Americans filing for unemployment insurance rose to a 16-year high, according to a government report. The U.S. Department of Labor reported that initial filings for state jobless benefits increased by 27,000 to 542,000 for the week ended Nov. 15.

Another government report released Thursday showed a bleak reading on the economy's future health. The Conference Board said the index of leading economic indicators fell to to 99.6 in October, from 100.4 in September.

In addition, a report released Wednesday showed that a key inflation reading fell 1% last month. The Labor Department reported that the Consumer Price Index was much weaker than September's flat reading and exceeded the 0.8% decline a consensus of economists surveyed by Briefing.com had forecast.

Where economists had been worried about inflation as record energy prices supported consumer prices, they are now concerned about deflation.

Crude prices fell on Friday, settling at a 5 1/2 year low. Light, sweet crude for January delivery fell 51 cents to close at $49.93 a barrel on the New York Mercantile Exchange.

Retail gas prices in the U.S. slid below $2 a gallon for the first time in three and a half years, according to motorist group AAA. The price is down by more than 50% from the record reached in July.

CNNMoney.com staff writer David Goldman contributed to this report.