NEW YORK (Reuters) - The dollar rose against the euro and a basket of currencies on Friday as fears of a possible Dubai debt default boosted the greenback's safe-haven appeal.

But the dollar lost some momentum while the yen retreated from a 14-year high versus the greenback as US equities trimmed losses. Low trading volume a day after the US Thanksgiving holiday on Thursday may have exaggerated moves, traders said.

Dubai on Wednesday said it would ask creditors of two flagship firms, including conglomerate Dubai World, for a standstill on debt payments as part of a restructuring.

"Whenever there is a situation where traders are unsure about how the political or economic environment will pan out, such as Dubai's woes, they always sell first and ask questions later," said Kathy Lien, director of currency research at GFT Forex in New York. "The US dollar and Japanese yen are the biggest beneficiaries of this selling."

The potential magnitude of the event, measured by Dubai World's $59 billion in debt, shook markets on concern over contagion in the banking sector, but a recovery in US and European stocks suggested some investors expected the event would not derail a recovery.

The ICE Futures US dollar index, a measure of its value against six major currencies, was up 0.3 percent at 75.032 having been up around one percent earlier.

The euro was down 0.4 percent at $1.4953 having earlier slid as low as $1.4830, down more then three cents from a 15-month high of $1.5144 touched on Wednesday.

The dollar fell as far as 84.83 yen , its weakest since 1995, edging ever closer to its record low of around 79.75. It last traded at 86.78 yen, up 0.4 percent on the day.

"It is likely to take at least a few days before the implications of the impact of a possible default from Dubai are properly digested, but for the present it seems that the market is seeing this negative news as a blow to the global recovery but not one that will push it off course," said Jane Foley, chief strategist at Forex.com

On the week, the euro gained 0.6 percent against the dollar while the greenback fell 2.3 percent versus the yen.

Analysts say the yen also pulled back after Japan signaled growing discomfort with the yen's surge and Finance Minister Hirohisa Fujii raised the prospect of a Group of Seven joint statement on currencies.

The Bank of Japan stepped closer to currency intervention on Friday than at any time in the last five years by checking exchange rates with commercial banks. Still, market sources said intervention was highly unlikely in the short-term.

Japanese National Strategy Minister Naoto Kan also said on Friday the Japanese government and the Bank of Japan will act together to deal with the rise in the yen and that he was considering measures himself.

"I don't think the signals from the Japanese officials have been particularly aggressive, but that's in the back of market's mind that the yen (apart from the Swiss franc) stands the highest chance of actually seeing some action from the authorities," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

"If we were to trade consistently below (85 in dollar/yen), the chance of intervention will rise substantially," he added.

Group of 7 countries issued a statement in October 2008 when the yen rallied against other major currencies, so traders and analysts said a joint statement by the group, or the bigger Group of 20, was possible. Others doubted the chance of joint intervention above 80 yen.

The speed and scale of dollar/yen's fall was such that a recovery was always likely, analysts say, particularly after Mr. Fujii said the moves were "extreme" and it was possible Japan could respond.

Commodity-linked currencies fell as oil dropped more than two percent and gold traded lower. The Australian dollar shed 0.8 percent to US$0.9059 and the New Zealand dollar lost 0.9 percent US$0.7094.