LONDON - A FLIGHT from emerging market debt and stocks helped push the dollar to a two-year high against major currencies on Thursday as fears built about a global recession.

Investors were also focusing on major company earnings reports, fearful that the worst financial crisis in 80 years and the deteriorating global economy could combine to batter corporate profits.

European shares put in gains on the back of some positive results, but Asian shares fell to four-year lows and emerging markets were again under the gun.

Emerging market sovereign debt spreads blew out to more than 800 basis points over US Treasury yields, a gap not seen since late 2002.

The cost of insurance against sovereign debt default in countries such as South Korea, Indonesia, the Philippines, Russia and Kazakhstan has soared over the past two days.

'There is now little argument that the world economy will experience a period of sub-par growth, and a recession in several advanced economies looks increasingly likely,' Goldman Sachs said in a research note.

Investor flight from emerging markets over the past few weeks has accelerated this week, pushing the US dollar to new heights, among other things as money is both repatriated from overseas and seeks relative safety in US fixed income.

The dollar hit a two-year high against a basket of currencies with the dollar index up 0.2 per cent to 85.6 after hitting a two-year peak above 86. The euro slipped 0.3 per cent from late US trade to US$1.2817 (S$1.923).

'We are going to see the current pressures continue as tensions in emerging markets continue. The dollar will remain supported and the high yielders will stay under pressure,' said Ian Stannard, FX analyst at BNP Paribas.