Dollar gains on global jitters

NEW YORK (CNNMoney.com) -- The dollar rose against most major currencies Thursday, but remained weak against the yen, as concerns about the global economic recovery -- particularly in some European nations -- boosted demand for safe investments.

What prices are doing: The dollar was up 1.1% against the euro at $1.3742 and 0.8% versus the U.K. pound at $1.5761. But the dollar fell more than 2% versus the Japanese yen to ¥89.09.

What's moving the market: The dollar, which is seen as a safe haven, is being supported by ongoing worries about the U.S. job market and the debt woes facing European economies such as Greece and Portugal.

Those concerns weighed on stock markets around the world, with the Dow Jones industrial average falling more than 200 points and closing below 10,000 for the first time since November. Markets in Europe closed significantly lower. The Heng Seng in Hong Kong closed 1.8% lower.

"It really is a financial markets thing today," said Sacha Tihanyi, a currency strategist at Scotia Capital in Toronto. "This is just an excellent environment for the U.S. dollar against other currencies."

Though credit concerns have been weighing in Europe since January, DailyFX.com currency strategist John Kicklighter said the larger trend of risk aversion across markets is what's primarily driving the dollar higher.

In the United States, traders were on edge following a report that the number of Americans filing new claims for unemployment rose to 480,000 last week from a revised 472,000 the previous week.

Economists surveyed by Briefing.com expected 455,000 new claims.

The report came one day before the Labor Department's monthly report on employment, the most closely watched gauge of the job market. That report is expected to show a net gain of 15,000 jobs in January, with an unemployment rate of 10%, according to a Briefing.com consensus.

Meanwhile, the European Central Bank announced plans to hold rates at 1%, as expected. The ECB said in a statement that it expects the euro area economy to grow at a moderate pace in 2010.

The Bank of England also held interest rates steady at 0.5%, as expected. The BoE did not change any of its stimulus plans.

But the ECB also said many euro area countries face "large, sharply rising fiscal imbalances" that could threaten economic growth in the Euro Zone.

The euro has been under pressure in recent weeks amid growing concerns that the debt problems facing Greece, Portugal and Spain could lead to more economic pain in Europe.

"Concerns about European government finances and budget deficits, and the possible risk of default are all on the minds of investors today," said said Nick Bennenbroek, chief currency strategist at Wells Fargo in New York.

What analysts are saying: "Despite euro's woeful performance this week, the unit now appears to be grossly oversold and may bounce on relief grounds alone," said Boris Schlossberg, director of currency research at trading firm GFT.

"Mr. (Jean-Claude) Trichet's unwavering support of Greece should calm fears about fragmentation in the region and lend euro a bit of support as the day progresses," he added, referring to comments by the ECB's president.

But Kicklighter said the dollar will continue to gain ground both as it appeals to investors as a safe haven asset and as a funding currency.