(Recasts; updates prices)
NEW YORK, Nov 16 (Reuters) - The dollar slid on Friday, but was on track for its biggest weekly gain against a basket of major currencies in over a month despite uncertainty in the credit market.
The dollar fell against most major currencies on reports showing the biggest drop in U.S. industrial production since January and lower-than-expected foreign investment in U.S. assets in September, but it rose against the yen as Wall Street stock indexes posted modest gains on the day.
"The renewed bout of credit risk and associated increase in risk aversion is clearly dominating trading this week," said Jay Meisler, principal of Global-view.com, an online forum for traders and investors.
"The FX market is currently equity dependent," he added.
The euro <EUR=> edged up 0.2 percent from late Thursday, to $1.4648, around a cent away from record highs of $1.4752 hit last week, according to Reuters data.
The dollar was down 0.3 percent to 1.1188 Swiss francs <CHF=>, after earlier touching 1.1164, the lowest level since April 1995, according to Reuters data.
The New York Board of Trade's dollar index (.DXY: Quote, Profile, Research), which tracks the U.S. currency's performance against a basket of six major currencies, was down on Friday at 75.785, but it was up 0.6 percent on the week -- its first weekly gain in six weeks. At current levels, the index's gains on the week were the most since early October.
Against the yen, the dollar ticked up 0.5 percent to 110.91 yen <JPY=>. On Monday, the greenback dropped to a 18-month low of 109.10 yen. The euro was also up 0.7 percent to 162.48 yen <EURJPY=>.
Overnight the yen had strengthened as jittery investors took cues from falling Asian and European stock markets to continue a move out of relatively risky carry trades funded by cheap borrowing in the Japanese currency.
The dollar has fallen about 5 percent against the euro since mid-September when the Federal Reserve slashed its benchmark interest rate by 50 basis points to stave off a possible recession.
Futures markets currently reflect a slightly lower chance of a December rate cut after comments from two Federal Reserve officials on Friday downplayed high expectations for a 25 basis point easing in monetary policy. For details, see [ID:nN16181066]
Despite the dollar's stabilization this week and the muted chances of another Fed rate cut, many economists said the dollar's long-term declining trend remains intact.
U.S. October "industrial production adds to the bearish dollar overall," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.
"It is reinforced by the TIC long-term numbers, though that is a little bit dated," he added.
The Treasury International Capital report for September showed a lower-than-expected flow of long-term capital into the United States of $26.4 billion, below expectations of $70 billion. [ID:nN16561548].
Though foreigners flipped from being net sellers of U.S. government and corporate bonds and stocks to net buyers, the total flow, taking into account the amount of foreign securities that U.S. investors bought, was not enough to fund the $56 billion U.S. trade deficit in September.
"Slowing economic growth and credit concerns likely will undermine flows into U.S. corporate bonds and equities, undermining the U.S. dollar," said Gabriel de Kock, currency economist at Citi Markets and Banking, in a note to clients.