LONDON (AFP) - The dollar fell against the euro on Friday as news of a big loss at investment bank Bear Stearns sparked fresh concern about fallout from the US subprime loan crisis.

In morning trade, the single European currency rose to 1.4375 dollars from 1.4320 in New York late on Thursday.

The dollar rose to 113.36 yen from 113.09.

"The dollar is mostly lower across the board compared to yesterday's European close, with the exception of against the yen which is moderately lower on the back of a decent gains in Asian equity markets," ABN Amro analyst Melinda Smith said.

Worries about the health of major US banks weighed on the greenback, dealers said.

"Investors sold the dollar after the bad earnings report of Bear Stearns and a fall in the Philadelphia December business index to the lowest since 2003," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

US investment giant Bear Stearns posted its first-ever quarterly loss of 854 million dollars and a larger-than-expected 1.9 billion-dollar write-down due to its exposure to the subprime loan crisis.

The world's largest bond insurer MBIA also disclosed its has a 30.6 billion-dollar exposure to collaterised debt obligations (CDO) -- which are generally asset-backed securities -- an amount eclipsing its net worth.

This suggests "that bad news on credit would likely continue into the first quarter of 2008," NAB Capital strategist John Kyriakopoulos wrote in a research note.

The Philadelphia Federal Reserve Bank said on Thursday that its factory activity index had plunged to minus 5.7 from 8.2 in November, the lowest level for four years.

Dealers said the market was sensitive to negative news in thin trade before the Christmas and year-end holidays.

Investors were looking ahead to another loan auction by the US Federal Reserve later in the day as part of efforts to encourage banks to borrow.

Elsewhere, sterling struck a four-year low against the euro on expectations of cuts to British interest rates in 2008, dealers said.

The market was also digesting the Chinese central bank's move to hike interest rates Thursday for the sixth time this year as it strives to curb rising inflation and stop the economy from overheating.

"The interest hike will no doubt fuel expectations that China will allow a faster rate of currency appreciation, which tends to support the yen," wrote Kyriakopoulos.

In European trading on Friday, the euro changed hands at 1.4375 dollars, against 1.4320 late Thursday, at 162.88 yen (161.98), 0.7242 pounds (0.7219) and 1.6613 Swiss francs (1.6591).

The dollar stood at 113.36 yen (113.09) and 1.1562 Swiss francs (1.1581).

The pound was at 1.9845 dollars (1.9830).

In London, the price of gold rose to 802.30 dollars per ounce from 795.25 dollars late on Thursday.