By MALCOLM FOSTER
Associated Press Writer

TOKYO (AP) - The dollar sank to a fresh 14-year low against the yen Friday as worries about Dubai's debt mountain drove investors to buy perceived safe haven assets like the yen.

Japanese Finance Minister Hirohisa Fujii called the yen's surge "a very serious situation." He said Tokyo will take appropriate measures as needed, suggesting that Japan may cooperate with the U.S. and Europe to calm foreign exchange markets.

"I am monitoring the situation very carefully," Fujii said.

The Japanese currency briefly touched 84.81 yen - the lowest since mid-1995 - in early trading before bouncing back to 86.47 yen. The euro, meanwhile, weakened to $1.4921 from $1.5021 late Thursday.

Concerns about debt problems afflicting Dubai have caused investors to flee riskier assets. Dubai World, a government investment fund with debts totaling around $60 billion, has asked creditors if it can postpone payments until May.

The move toward higher-yielding investments in emerging markets had been growing recently on hopes the world was recovering from the financial crisis. But Dubai's problems have reminded investors of the risks involved, said Minoru Shioiri, chief manager at the foreign exchange section of Mitsubishi UFJ Securities in Tokyo.

"Everyone wants to pull back on the risks, cash in on investments in emerging markets and make an exit," he said.

Expectations that U.S. interest rates will remain extremely low are also weighing on the dollar, which has slid steadily over the last few weeks.

Traders remain unconvinced that Japanese authorities will intervene in the currency market to stem the yen's appreciation. Japan hasn't done that since March 2004.

"There's a sense that it's a one-way bet," said Richard Jerram, economist Macquarie Securities in Tokyo, who questioned the logic of buying yen due to worries about Dubai.

"If you're looking for safe havens, people should be buying dollars," he said. Instead, traders are piling into the yen "because there's a perception that the government will do nothing about it."

The dollar has steadily dropped this week after minutes from the latest U.S. Federal Reserve board meeting suggested the central bank wasn't worried about the dollar's decline and that it plans to keep interest rates at "exceptionally low levels" for an "extended period." Currently the Fed funds rate stands at a range between zero and 0.25 percent, one of the lowest in the world.

Japan's business executives are clearly worried about the yen's appreciation, which cuts into foreign income, on top of falling prices and general weakness in consumer spending.

Fujio Mitarai, chairman of Keidanren, Japan's largest business lobby, urged the government to take action.

"In the midst ofdeflation, such a sharp rise in the yen is a very serious problem and could drag down the economy," Mitarai told reporters.

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Associated Press Writers Yuri Kageyama and Tomoko A. Hosaka contributed to this report.

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