Investors were heading for the safe havens of bonds and the dollar in holiday-thinned European trading by mid-afternoon yesterday, while weak share markets kept an eye on tentative gains from the Dow.

Nerves over political and economic turmoil in Asia knocked confidence in shares and helped bolster the dollar, although technical trade dragged it back from near seven-year highs against the beleaguered yen.

Japanese Vice Finance Minister Mr Koji Tanami said yesterday that Tokyo would take action in the currency markets as needed, adding that Japan and the United States were in agreement in their worry over excessive weakness in the yen. This was a reiteration of Japanese officials' recent remarks.

The dollar set a fresh near seven-year high at 139.68 yen earlier as the markets continued their assault on the Japanese currency.

After half an hour of trade the Dow was up 0.4 per cent, helping the few European bourses which were not on holiday to pare earlier losses. Milan showed little activity as both Frankfurt and Paris were closed.