TOKYO: The dollar nose-dived to its lowest levels in 12 1/2 years Monday in Asia, falling below 96 yen as the Federal Reserve s rate cut failed to calm market fears about more US bank write-downs.
The US Fed on Sunday cut its discount rate, or its lending rate to financial institutions, by a quarter point to 3.25 percent.
The move only managed to give a temporary lift to the US currency before it began its steep decline.
The Fed s action is needed but it leaves the current main market problems unresolved, and there seems to be nothing that can stop this (dollar-selling) flow for now, said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland.
The dollar fell to 95.72 yen, its lowest point since August 1995, in morning trade in Tokyo before recovering to 96.84 in the afternoon. Late Friday in New York the dollar was trading at 99.17 yen. It broke below 100 yen just last Thursday.
The euro also rose to a record against the dollar, climbing as high as $1.5851 from $1.5676 Friday.
News that JPMorgan Chase had bought rival investment bank Bear Stearns – a move aimed at averting a bankruptcy – also sparked renewed market worries about the extent of the credit crisis, sending Asian stocks tumbling.
Japan s benchmark Nikkei 225 stock index fell 3.71 percent, or 454.09 points, to close at 11,787.51.
The Bear Stearns news increased players fears about credit markets and liquidity conditions, making it increasingly difficult to build dollar-long positions, said Keiichi Iguchi, a dealer at Resona Bank.
It was hard to predict how much further the dollar may fall, as there are no concrete policy measures from either the Japanese or US governments, said Masanobu Ishikawa, manager of foreign exchange at Tokyo Forex and Ueda Harlow.
Japanese officials quickly called for calm in the currency markets, but did not announce any plans to intervene to shore up the greenback by buying up dollars.
Excessive fluctuation is never favorable for the Japanese and world economy, Chief Cabinet Secretary Nobutaka Machimura said. We are concerned about the current situation with currencies fluctuating too much.
The weak dollar hurts the country s key exporters by eroding their overseas earnings when repatriated to Japan.
The dollar rose against other Asian currencies. It gained 0.92 percent against the Philippine peso to 41.690, and 0.65 percent against the Singapore dollar to 1.3860. The dollar also rose 0.80 percent against the Taiwan dollar to 30.966. -AP
