NEW YORK: The US dollar strengthened against the euro on Thursday as investors sought shelter after a massive Wall Street sell-off, despite new data showing a deteriorating US labor market.

Around 2200 GMT, the euro was trading at 1.2458 dollars, down from 1.2508 late Wednesday.

The dollar slipped to 93.82 yen from 95.77, with the yen keeping its status as a safe haven.

Investors fled to the dollar as a safe haven while US stocks plunged for the second straight day amid investors panic over the deepening financial crisis.

Wall Street's main broad-market indicator sank to an 11-1/2-year low, and the Dow Jones Industrial Average sank to a fresh five-and-a-half year low, down 5.56 per cent.

"The dollar continues to trade on risk aversion and looks to equity to read the level of risk aversion," said David Gilmore, analyst at Foreign Exchange Analytics.

The dollar often gains ground after the publication of troubling US economic data, and Thursday's Labor Department report made that point.

Initial claims for unemployment benefits shot up to a 16-year high last week, the data showed, as the world's largest economy appeared to be sliding into a deep recession.

"As far as we can tell, companies have thrown in the towel since September, and are now hunkering down for a deep and extended recession," said Ian Shepherdson, chief US economist at High Frequency Economics.

The yen managed to shrug off news that Japanese exports dropped at the fastest pace in almost seven years, pushing Asia's largest economy deeper into recession.

Switzerland's central bank slashed key interest rates by a record one percentage point and warned of tough times ahead after dismal economic data.

Credit remained tight despite unprecedented government efforts to provide liquidity to the markets.

"We see nothing at all to suggest that credit conditions are improving; indeed, just about all the latest evidence points to further deterioration," said Ian Shepherdson, analyst at High Frequency Economics.

In late New York trade, the dollar rose to 1.2245 Swiss francs from 1.2119 late Wednesday.

The pound was at 1.4719 dollars, down from 1.4960.

- AFP/yt