NEW YORK (Reuters) - The dollar and yen posted sharp gains on Friday after the US Securities and Exchange Commission charged leading investment bank Goldman Sachs with fraud, prompting investors to seek refuge in both safe haven currencies.

Goldman Sachs Group Inc. on Friday was charged with fraud by the SEC in the structuring and marketing of a debt product tied to sub-prime mortgages, shaking investors recovering from the 2008 banking crisis.

The news saw investors take profits on recent stockmarket gains and reduce holdings in riskier assets and currencies such as the euro, sterling, and Canadian dollar.

"The Goldman news really changed the tide for financial markets," said Steven Butler, director of currency trading at Scotia Capital in Toronto.

"The market was already feeling risk averse even before Goldman. That news just accelerated the unwinding of risky trades and so we're seeing safe-haven bids in the dollar and yen."

The US dollar and Japanese yen typically get a bid in times of heightened risk aversion, given their normally stable banking systems and their positions as the world's two largest economies. The dollar and yen had both risen on Friday before the Goldman news was announced, as investors again worried about the fate of a European Union-International Monetary Fund aid plan to help Greece avoid a debt default.

As a result, the premium demanded to buy Greek government bonds rather than German bonds rose further.

In late afternoon trading, the euro was down 0.5 percent against the dollar at $1.3506, just off a one-week low of $1.3473.

The $1.3500 level was seen as key because it marks the peak reached last Friday before the euro zone single currency gapped higher after the weekend in response to the agreement on terms of the Greek bailout deal.

The US dollar also surged against the Canadian dollar, rising 1.2 percent at C$1.0130 The Australian dollar fell 1.1 percent to US$0.9250 versus the greenback, while the New Zealand dollar dropped 0.5 percent to US$0.7089

The euro fell 1.5 percent to 124.37 yen, after going as low as 123.88 yen. The dollar fell nearly one percent to 92.1 yen after falling as low as 91.91.

The yen was already stronger on the day ahead of the Goldman news, largely shrugging off comments from a lawmaker from Japan's ruling party who said monetary easing and intervention to weaken the yen were needed to beat deflation.

The Japanese currency, sometimes used as a proxy for other less-liquid Asian currencies, may have been boosted after Chinese President Hu Jintao said China has always acted on the principle of gradually putting in place a managed floating exchange rate system.

Hu Jintao made the comments in a speech, a transcript of which was released on Friday.

"The news doesn't change our view that China will be looking at flexibility in its currency regime and moving to a crawling peg," said Mike Moran, senior currency strategist at Standard Chartered in New York. "But the volatility that we have seen suggests that the market is extremely sensitive to any news on China."

Sterling, meanwhile, fell on concerns a May 6 UK election may result in no single party winning a majority, as polls showed the heads of the two main parties were beaten in a TV debate by the leader of the third, the Liberal Democrats.

The British pound fell 0.7 percent against the dollar to $1.5389.