Investor fears of a drop back into global recession lifted the currencies traders consider safe havens: The Swiss franc, Japanese yen and the U.S. dollar.
The so-called safety currencies gained after a slate of reports released Thursday on U.S. manufacturing, jobs and the housing market spooked investors. There was a steep drop in U.S. home sales last month, more people filed jobless claims last week and the August regional manufacturing report was weak. There also was downbeat data from overseas.
Morgan Stanley also cut its forecast for global economic growth for this year and 2012, saying the U.S. and the 17 countries that use the euro were "hovering dangerously close to a recession."
The Dow Jones industrial average plunged nearly 420 points, or 3.7 percent. The Standard & Poor's index slid 4.5 percent. And gold, which has become something of a substitute currency for nervous investors, hit a new record price near $1,830 per ounce, though it remains below its 1980 peak when adjusted for inflation.
In currencies, the euro fell to $1.4319 from $1.4451. Stocks of European banks sold off on concerns about financial institutions' ability to get access to funding. Some banks own lots of debt of countries that investors are afraid might default without aid from the European bailout fund. It's unclear how much bad debt is on the books, and banks are becoming afraid to lend to one another, a problematic situation reminiscent of the financial crisis of 2008.
The British pound fell to $1.6496 from $1.6566.
The dollar rose against the favored safe-haven currencies, to 76.54 Japanese yen from 76.48 yen and to 0.7924 Swiss franc from 0.7895 franc. The franc and yen climbed sharply against the euro, however.
The Swiss and Japanese central banks have taken several measures this month to curb the gains in their currencies because a stronger franc and yen hurt Swiss and Japanese exports.
Traders consider the Japanese yen "safe," despite Japan's troubled economy, because Japanese investors hold much of the country's massive public debt. That lessens the risk of a financing crisis. Meanwhile, Switzerland has acted as a European haven for investors wary of the euro and the debt loads of countries in the 17-nation euro bloc.
The dollar is the world's reserve currency, and the U.S. is the world's largest economy. But the dollar's appeal has dimmed on concerns about slow growth and the country's ability to cut its deficit in the long term.
The dollar jumped to 99.08 Canadian cents from 98.05 cents. It also leaped against currencies of other countries that, like Canada, are big commodity exporters. Those currencies include the Australian dollar, Norwegian krone and Brazilian real.
Those countries' economies are strongly tied to the price of commodities such as oil, iron ore and copper. Prices of commodities decline as fear rises that a weaker global economy will require fewer raw materials. That drop then weighs on the "commodity-linked" currencies.