Dollar climbs on global market rout

Global selloff deepens

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NEW YORK (CNNMoney.com) -- The dollar rose against the euro and the pound Friday, with the British currency falling to its lowest level in five years as global markets remain shaky.

At 4 p.m. ET, the 15-nation euro bought $1.3412, down from $1.3563 late Thursday. It traded as low as $1.3354, reaching levels not seen since June 2007.

Great Britain's pound slid to $1.6737 at one point, the lowest it's been since 2003. But it regained some ground to trade at $1.7050 from $1.7009 in the previous session.

The pound's weakness comes as investors remain wary of higher-yielding currencies and appear to favor less risky trades involving the U.S. dollar and the Japanese yen.

The dollar traded at ¥100.29, up from ¥98.87.

A sharp selloff in European markets kept currency traders on edge. Stock markets in London, Paris and Frankfurt were all down between 7% and 8% at midday. And Japan's Nikkei index slid more than 9%.

On Wall Street, meanwhile, stocks ended lower at the end of an extremely volatile session.

The carnage in global stock markets has undermined currency-trader appetite for risk and driven them to the perceived safety of the U.S. dollar.

"While this turmoil continues to swirl, the U.S. dollar should remain supported, especially so long as uncertainty remains in other major economies surrounding government plans to ameliorate the financial situation," wrote Steve Malyon, currency strategist at Scotia Capital, in a note to clients.

President Bush urged Americans Friday to have confidence in the economy and said the government is acting to "resolve this crisis."

"Here's what the American people need to know: The U.S. government is acting, and we will continue to act, to resolve this crisis and return stability to our markets," he said.

The government has taken a number of unprecedented steps in the last two weeks, including lowering interest rates in conjunction with central banks worldwide, as it attempts to calm anxious investors and shore up the nation's economy.

But the efforts have yet to show any significant results.

Many analysts say the U.S. government's next move will be to invest tax dollars directly into ailing banks and major companies.