LONDON (AFP) - The dollar recovered against the euro and yen on Friday, while all eyes were on the Japanese currency amid speculation that Tokyo may intervene to curb its rise. In London trade, the euro fell to 1.2768 dollars from 1.2821 dollars in New York late Thursday. Against the Japanese currency, the dollar rose to 85.44 yen from 85.38 yen on Thursday. The dollar won back ground after falling against most leading currencies on Thursday as grim economic data dampened hopes for the US recovery. This double whammy of deteriorating US data has dealt a significant body blow to investor sentiment and reinforced fears about a double-dip recession, said Michael Hewson, a foreign exchange analyst at CMC Markets. It has also given investors a bit of a dilemma with respect to the dollar, as to whether to sell it due to the shockingly bad data, or buy it, for its safe haven qualities. To get around this problem investors have been diversifying into yen, Swiss francs and gold, with all three gaining significant ground. The pound has benefited to some extent as well, Hewson added. Traders were on Friday awaiting Tokyos moves to stall the yens rise, which pushes up the cost of Japans exports, making them less competitive. Analysts said sentiment was soured by uncertainty amid rumours that the Bank of Japan (BoJ) may hold an emergency meeting on new economic measures as early as Friday. The Sankei Shimbun daily reported Thursday that the BoJ emergency meeting would take place before central bank chief Masaaki Shirakawa meets Prime Minister Naoto Kan on Monday. We are hearing rumours that the BoJ may hold an emergency meeting, said Yuji Saito, an analyst at Credit Agricole. Market players are looking to possible moves by the Bank of Japan, he said. The euro is also losing direction amid the uncertainty. The dollar dropped sharply last week to 84.90 yen, near its 15-year low, hurting the outlook for Japans economic recovery. Fears that Japans recovery from recession is fading were heightened by weaker-than-expected gross domestic product data this week, showing that the economy grew by an annualised 0.4 percent in April-June. Japans finance minister said Friday he was closely watching currency markets as the stubbornly strong yen threatens the countrys export-led recovery from recession. In London trade on Friday, the euro changed hands at 1.2768 dollars against 1.2821 dollars on Thursday, at 109.09 yen (109.47), 0.8222 pounds (0.8218) and 1.3201 Swiss francs (1.3229). The dollar stood at 85.44 yen (85.38) and 1.0340 Swiss francs (1.0317). The pound was at 1.5527 dollars (1.5597). On the London Bullion Market, the price of gold fell to 1,230.75 dollars an ounce from 1,233.50 dollars an ounce on Thursday.