The US Federal Reserve meanwhile launched a new effort with other central banks to keep money markets alive as US lawmakers wrangled over a plan to end the worst financial crisis in almost a century.

President George W. Bush urged Congress to unite and move quickly to approve a 700-billion-dollar scheme aimed at calming markets and restoring confidence in the US economy.

The European single currency in late-day trading stood at 1.4595 dollars, down from 1.4608 on Thursday.

The dollar fell to 106.01 yen from 106.53 yen Thursday.

"The uncertainty about the decision of the 700-billion-dollar bailout plan continues to weigh on the dollar," Commerzbank analysts said in a statement.

"However, the general sentiment remains dollar positive," they added. "It is still possible that the Americans will manage to agree on a bailout plan during the weekend, which in turn would boost the dollar."

In ongoing efforts to soothe the troubled financial sector, major central banks added 13 billion dollars to an exceptional fund that provides the US currency to European banks, bringing the total offered to 290 billion dollars.

Market players were meanwhile waiting to see if the deadlocked talks in Washington could be broken.

Democrats accused Republican White House contender John McCain of sabotaging the rescue package, which President George W. Bush said is needed to save the US economy from a prolonged recession.

Pressure on markets increased further with the collapse of Washington Mutual bank, which was taken over by JPMorgan Chase for 1.9 billion dollars.

"The foreign exchange market remains fragile after the collapse of Washington Mutual and the failure of Congress to broker a deal on the details of the Bush administration's bailout plan," said Derek Halpenny, European head of global currency research at The Bank of Tokyo-Mitsubishi on Friday.

"The relative calm in the market reflects the fact that market participants assume an announcement will be made prior to the close of trading today," he added.

Congress has been bickering over the proposal, with Democrat lawmakers trying to add amendments that would help troubled US mortgage holders while Republicans oppose efforts to slash the salaries of Wall Street executives.

"The plan's contents are unclear and markets are uncertain how it's going to play out," said Kenichi Yumoto, vice president of forex sales at Societe Generale.

While the dollar could rise if Congress approves the rescue plan, the gains are likely to be short-lived owing to concerns about the worsening US economy and public finances, added Yumoto.

US durable goods orders and new homes sales fell sharply in August, while weekly jobless claims soared, the latest data showed.

The US government on Friday revised down economic growth to a 2.8-percent pace in the second quarter, prompting a brief dip in the dollar.

"This is an economy still languishing," said Daragh Maher, a strategist at investment bank Calyon. The US government's rescue plan "may prove to be the catalyst for improvement, but it will take time to tell."

In London trade on Friday, the euro stood at 1.4595 dollars against 1.4608 late Thursday, 154.90 yen (155.65), 0.7933 pounds (0.7949) and 1.5894 Swiss francs (1.5935).

The dollar stood at 106.01 yen (106.53) and 1.0883 Swiss francs (1.0906).

The pound was at 1.8429 dollars (1.8371).

On the London Bullion Market, the price of gold rose to 902 dollars an ounce at the fixing from 888.50 dollars late Thursday.

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