Dollar plunges to fresh lows against euro, yen
TOKYO (AFP) — The dollar plunged in Asian trade Monday on fears that the credit crunch could claim more victims on Wall Street, hitting a record low against the euro and a 12-year trough versus the yen, dealers said.
An emergency rate cut by the US Federal Reserve only added to the sense of crisis after the near-collapse of US investment bank Bear Stearns, which is being sold to JPMorgan Chase at a rock-bottom price, they said.
The euro struck a new lifetime peak of 1.5905 in early trade while the dollar fell by as much as 3.5 percent from levels in New York on Friday to hit 95.75 yen, a bottom not seen since September 1995.
The greenback later clawed back some ground to 96.70, still sharply lower compared with 99.18 in New York late Friday.
The euro later stood at 1.5840 dollars, up from 1.5669 late on Friday, while dropping to 153.15 yen after 155.46.
"The market's insecurity and worries over the US economy sent the dollar plummeting," said Masaki Fukui, senior economist at Mizuho Corporate Bank.
In a rare weekend announcement, the Federal Reserve said it was cutting by a quarter-point to 3.25 percent its primary credit rate, which is offered at the Fed's discount window for institutions "in sound condition."
The move came amid growing concerns about the health of the US financial system following the woes of Bear Stearns.
Analysts said the rate cut underscored the extent of the problems facing the world's largest economy due to a housing slump and credit crunch sparked by a wave of defaults on subprime, or high-risk, mortgages.
"Investors seem to have taken these moves as evidence of the deepening of the credit crisis," NTT Smarttrade director Takashi Kudo said.
"Investors also seem to think that the Fed's action was a little too late."
Asian stock markets plunged, tracking Wall Street down.
JPMorgan Chase announced Sunday that it would acquire Bear Stearns for about two dollars a share, making the sale worth about 236 million dollars, a tiny fraction of the stock market value of 3.54 billion dollars on Friday.
"The Federal Reserve's first rescue of a broker since the Great Depression has heightened investor fears that the fallout from the credit market crunch has much further to go," noted NAB Capital analyst John Kyriakopoulos.
Traders are expecting a cut of 50 or 75 basis points to the US central bank's key federal funds rate on Tuesday.
Markets are even pricing in a chance that the central bank will slash the benchmark rate by 100 basis points to 2.0 percent, dealers said.
"There are a lot of negative factors against the dollar in the pipeline, including a deeper rate cut. That's why it is difficult to stop the dollar's decline," said Bank of America economist Tomoko Fujii.
The soaring yen is causing worries that Japan's export-led recovery from a decade-long slump could stall.
"We are concerned as the (currency) movements are excessive. We are watching with great interest," Japanese Finance Minister Fukushiro Nukaga said.
The dollar's plunge against other major currencies has triggered speculation in the foreign exchange market of possible intervention to prop up the greenback, although analysts said Tokyo may be reluctant to act alone.
Despite its troubles, the dollar was higher against regional Asian currencies, rising to 1.3868 Singapore dollars from 1.3820 on Friday and to a two-year high of 1,025.80 South Korean won from 995.40.
It gained to 41.65 Philippine pesos from 41.55, to 9,310 Indonesian rupiah from 9,265 and to 30.97 Taiwan dollars from 30.71, while easing to 31.41 Thai baht from 31.43.
