The Swiss franc, which has been traditionally seen as a safe-haven currency, benefited most from prevailing jitters about US stocks.

Although the euro pulled back from earlier highs against the dollar, as it underperformed the Swiss franc, traders said persistent wariness about further joint intervention by the Group of Seven industrialised nations should limit the euro's downside.

The tech-heavy Nasdaq composite index closed near to the year's closing low, set on May 23, while an after-hours profit warning from telecommunications equipment maker Lucent Technologies was expected to sour the US stocks further on Wednesday.

Traders noted that while there has been no direct link between the euro's moves against the dollar and the performance of the US Nasdaq this year, the market's main concern was the heavy exposure of the US consumers to the US stocks.

"What it boils down to is there is still euro negative sentiment, which is being held up by the fear of intervention and concerns about the US equity markets," said Mr Tony Norfield, head of global treasury research at ABN Amro Bank in London.

"I think because of the setback in the US equity markets, on the face of it, there will be concern about the US economic growth and hence the euro has stabilised. There is concern because of the low savings ratio and dependence on capital gains in the US to Keep the spending boom going."

The Nasdaq index - the best bellwether for the new economy - has now fallen for five weeks in a row and is 37 per cent below its record peak of March.The dollar fell to one-week troughs around 0.8765 per euro earlier before recovering ground to settle close to New York's closing levels just above $0.87.

It hit one-week troughs around 1.7280 Swiss francs and around $1.4640 per British pound. Euro/Swiss franc fell to troughs around 1.5110.

"You can look at Euro/Swiss franc and see safe-haven plays re-emerging from September, when people started to take profit on long dollar positions, but were not keen to buy the euro," said Mr Jane Foley, currency strategist at Barclays Capital.

"From the current perspective, if there is fear of volatility in stocks, it means that economies with a current account surplus will benefit the most."Latest data showed Germany's trade surplus narrowed to 4.0 billion marks in August from 5.9 billion in August 1999.

German industrial output rose a seasonally adjusted 1.1 per cent in August, above a consensus forecast for 0.2 per cent gain.

Some traders said there was a chance that the G7 might choose to take advantage of the euro's recent gains to prop it up further, but most perceived that the G7's objective was to stabilise the euro, which has so far been achieved.

"The US DOllar is definitely the most vulnerable (from the US equity weakness) and it's always more sensible to intervene when the market is going your way and in September they intervened when the euro was going their way," said a trader at a Japanese bank in London.

"But they may well be satisfied now to see the euro going upon its own."Elsewhere, the main focus for the yen remained this week's news of the bankruptcy of the Japanese Chiyoda Mutual Life Insurance Co and the potential liquidation of its and other insurers' massive foreign currency assets.

Dealers in Tokyo doubted that Chiyoda was repatriating much if anything of its portfolio. But its failure, and perhaps more importantly the fact that the authorities allowed it to fail, could encourage other insurers to be even more conservative in their foreign investments, they said.

September data on portfolio flows showed life insurers were already leery about foreign bonds, dumping a net 334 billion yen ($3.10 billion) worth.The real surprise in the data was that offshore investors had snapped up 1.18 trillion yen of JGBs, bringing their net purchases so far this year to a massive 6.9 trillion. While much of that would be hedged for forex exposure, it also came on top of a trade surplus that averages around one trillion yen a month.

This underlying demand for yen was one reason the currency remained strong despite troublesome fundamentals such as rising debt levels and dismal consumer demand, dealers said.

The dollar was hemmed just below 108 yen, treading a path within the previous day's ranges.