Dollar declines, yen gains on falling risk demand (Reuters) (09-05-2008)

LONDON, May 9 (Reuters) - The dollar resumed its fall on Friday as both a decline in stock markets and a sharp rise in oil prices to a record high put pressure on the U.S. currency, while falling risk demand gave wings to the low-yielding yen.

The euro continued to gain on the ECB President’s comments regarding the priority inflation has for this central bank, suggesting the bank may not cut interest rates soon.

The euro recovered after falling to a two-month trough below $1.53 as some investors expected Trichet to temper his tough talk on inflation and focus on signs of slowing euro zone growth.

However the euro was still over 4 percent off its record high versus the dollar set in April as a series of soft data keeps the single currency on the back foot.

The euro was up 0.3 percent at $1.5453, nearly two cents above a two-month low of $1.5284 set on Thursday before Trichet's press conference.

Sterling was little changed, having fallen to a two-month low of $1.9497 earlier in the day, after the Bank of England kept interest rates on hold at 5 percent on Thursday.

  Source Reuters