TOKYO -- The dollar rebounded against the euro as investor risk aversion grew following falls in US stocks and before US job data that is expected to be dismal.

The dollar also got a boost against the single currency after the European Central Bank on Thursday slashed interest rates to shore up the euro zone economy.

US stocks slid amid deepening fears about the economy with the Dow Jones industrial average falling 2.5 percent.

Investors' next focus is a key US employment report for November later on Friday. The US economy is forecast to have lost 340,000 jobs in November, according to economists polled by Reuters.

"Economic fundamentals aren't favorable. The dollar is expected to draw a certain amount of demand as investors remain averse to risk," said Yousuke Hosokawa, senior treasury department manager at Chuo Mitsui Trust and Banking.

The euro dropped 0.2 percent to $1.2755 from late New York trade on Thursday. The European single currency was steady at 117.98 yen.

The market is also keeping an eye on the fate of troubled US automakers including GM and Chrysler to see whether they can get government aid.

A corporate failure in the auto sector could have a big negative impact on the economy.

The dollar climbed 0.3 percent to 92.52 yen after hitting its lowest point in five weeks at 92.05 yen on EBS in US trading.

The ECB made its biggest ever cut in interest rates on Thursday, lowering benchmark credit costs by 75 basis points as it forecast a grim year for the recession-bound euro zone economy.

The Bank of England also slashed rates to their lowest level since 1951 and indicated more needed to be done to prevent a credit squeeze tipping Britain's economy into a prolonged recession.

Hosokawa said the yen and dollar were likely to hold their strength against European currencies as rate cuts erode the advantage of higher-yielding currencies.