Fears of a potential default in Dubai sent shock waves through financial markets Thursday, weighing on European and Asian equities and pulling the U.S. Dollar off of recent lows as investors sought out safe havens. Analysts said Dubai’s woes were a blow to sentiment, serving as a reminder that potential trouble spots remain in the world economy.

The U.S. Dollar rebounded versus most major rivals except the Japanese Yen Thursday, benefiting from safe-haven flows amid fears of a potential sovereign debt default by Dubai. Dubai’s shock move on Wednesday to restructure its biggest corporate debtor, Dubai World, and delay repayment on some of the company’s $59 billion in liabilities, dented risk appetite across asset markets on Thursday, to the U.S Dollar’s benefit.

Against the Japanese Yen the greenback headed for its worst month since December before a report next week that economists say will show U.S. business activity has declined, supporting the case for the Federal Reserve to keep borrowing costs near zero. The U.S. currency traded at $1.4945 per EUR from $1.5019 yesterday.

However the Dollar edged up from its lows against the Yen in early trading Friday as renewed risk aversion prompted investors to shed riskier assets, giving pause to broad Dollar selling. Market players also refrained from re-testing lows on the Dollar as trade thinned for the U.S. Thanksgiving holiday.

But the Dollar-bearish sentiment remained intact on views U.S. interest rates would stay low for some time and on pressure for the dollar to weaken to correct the U.S.’ imbalances.