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Last Updated: Monday, 17 March 2008, 22:03 GMT
Dollar slides to fresh euro low
Euros and dollars
Analysts fear that banks beyond Bear Stearns may be hard hit
The dollar has fallen to a new record low against the euro, amid continued fears over the state of the US economy and worsening credit conditions.

The US Federal Reserve has cut a key lending rate, but the move failed to buoy investor confidence.

At one stage it took $1.5904 to buy one euro, before it strengthened to $1.5745 in late trade in New York.

With giant investment bank Bear Stearns needing an emergency rescue, there are concerns other banks may follow suit.

The dollar also weakened to 95.72 yen, its lowest since August 1995.

"It has certainly been something of an historic weekend, with an emergency Fed rate cut and news that JP Morgan intends to acquire Bear Stearns marking the next chapter in the credit crisis," said James Hughes of CMC Markets in London.

"Unsurprisingly this has been broadly bad news for the dollar with [the] euro-dollar managing a short-lived breach above 1.5900," he said.

US Treasury Secretary Henry Paulson declined to speculate on potential intervention in currency markets to support the dollar.

He said that the US government had a "strong dollar policy", which was in the nation's interest.

'Alarming'

JP Morgan Chase is set to acquire Bear Stearns, Wall Street's fifth-largest investment bank, for $2 a share - a fraction of its previous value.

"This is not the kind of help you want to see. Bear Stearns getting sold at $2 is alarming," said Peter Boockvar, equity strategist at Miller Tabak in New York.

"When you see the Fed relying on tools that haven't been used since the Depression, it's alarming," he said.

In a surprise move on Sunday, the US central bank lowered the discount rate - the rate given to financial institutions - to 3.25% from 3.5%.

As the greenback continues to weaken, investors are opting to place their money in commodities, contributing to the sharp rise in oil prices.

Sweet crude oil climbed to a new high approaching $112 a barrel, before later slipping back to around $106.

"Gold will be the main beneficiary [of the falling dollar] as a hedge against global risk," said Australia & New Zealand Bank senior commodities analyst Mark Pervan.



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