Dollar, yen up as risk appetite problems hamper Europe

NEW YORK (Reuters) - The dollar and the yen rose on Thursday as fears about the deterioration of the fiscal problems of the eurozone and the jobs report that beat expectations in the United States led investors to abandon risky assets by the traditional safe-haven assets.

The euro sank to a low of more than eight months against the dollar and fell to a nearly a year against the yen amid concern about the fiscal health of the economic indebted euro zone as Greece, Portugal and Spain. It was the worst day for the euro against the yen since November 2008.

The dollar, on the other hand, fell to a nearly seven weeks against the yen, influenced by numbers of applications for unemployment benefits weaker than expected U.S.. That fell optimism about datum key nonfarm payrolls in January that will report on Friday.

Thursday's decline was the biggest day in the dollar against the yen since July 2009.

"A lot of risk aversion in the market, much concern about what is happening in Europe," said Steven Butler, director of currency trading at Scotia Capital in Toronto.

On Wall Street, U.S. stocks also fell, as did the raw materials, with crude futures down more than 5 percent, while spot gold fell 4.2 percent.

In afternoon trading, the euro fell 3.3 percent against the yen at 122.20, after falling to a low of 121.60 nearly a year, according to Reuters data.

The dollar fell to 88.58 yen, its lowest level since mid-December. It closed at 88.93 yen, down from 2.2 percent.

The euro slipped 1.2 percent on the day against the dollar at $ 1.3739, after touching its lowest in over eight months to $ 1.3729. The weakness was attributed partly to higher yield spreads between bonds of Greece, Portugal and Spain on the German benchmark bonds.

The euro was also pressured by comments from European Central Bank president, Jean-Claude Trichet, that many members of the euro area will have large fiscal imbalances and rapid growth.

The pound was also hit, falling to its lowest level in nearly four months at $ 1.5733 and lost 0.9 percent to $ 1.5748. Earlier in the session, the Bank of England announced a pause in their asset purchases under the quantitative easing as expected.