NEW YORK, Oct 25: The dollar and the yen bounced higher on Friday in a flight to safety, lifted by mounting fears of a global recession that has pushed the Japanese currency to fresh highs.

The euro plunged to $1.2623 from $1.2926 late Thursday in New York. The single European currency plummeted against the yen, to 118.98 yen from 125.73 yen. The dollar also slid against the Japanese currency, to 94.24 yen from 97.27 yen.

News of a record low in eurozone business activity and Britain on the brink of recession sent shockwaves through markets, sending investors fleeing for the shelter of the dollar and yen.

The yen often rises at times of financial turmoil as dealers unwind risky bets funded with cheap Japanese credit.

The single European currency has lost more than 20 per cent of its value against the dollar since striking a record high $1.6038 in mid-July.Bad economic news poured out of the European side of the Atlantic Friday.

The eurozone’s purchasing managers index (PMI) slid 2.3 points to 44.6 in October, its lowest level in since the index was launched in 1998.

The pound sank to $1.5269 , the lowest level since August 2002, after official data showed the British economy shrank by 0.5 per cent in the third quarter, its lowest level since 1992, after zero growth in the seond quarter.

British Prime Minister Gordon Brown said Friday he believed the Bank of England would consider a further cut in interest rates soon as a painful recession loomed.

We’ve seen cuts in interest rates from the Bank of England. I believe that they’ll be looking at this again over the course of the next few weeks, Brown told the BBC.

The Bank of England cut its key rate a half point, to 4.5 per cent in a coordinated cut with other major central banks on October 8. The central bank is scheduled to meet November 5-6.

In late New York trading, the pound plunged to $1.5900 from 1.6216 late Thursday.

The dollar rose to 1.1662 Swiss francs from 1.1589.—AFP