TOKYO The dollar's sharp slide to 13-year lows against the yen and fresh all-time lows versus the euro on Monday is stoking jitters about the possibility of joint central bank intervention to prop up the dollar.
"The speed of the slide in the dollar/yen is so rapid that U.S. action alone can no longer stop the dollar's downward trend," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investment.
"The time is ripe for coordinated intervention by U.S., European and Japanese authorities."
Remarks on Monday by Japanese Finance Minister Fukushiro Nukaga also kept investors on their toes.
"We will cooperate with European and U.S. currency authorities and will monitor markets very carefully," Nukaga told reporters, adding that the latest moves in currency markets had been excessively volatile and that he would watch markets carefully.
Nukaga's comments gave a slight lift to the dollar, which last traded near 97 yen after earlier dropping by over 3 percent to a 13-year low of 95.77 yen on electronic trading platform EBS.
"His comments were different from usual so that led to some speculation about joint intervention," said Hiroshi Yoshida, a forex manager at Shinkin Central Bank.
Yoshida said, however, that while some traders thought coordinated intervention was a possibility, there weren't many who believed that the chances of such action were high.
The euro stood at $1.5843, after having trimmed some gains since earlier jumping 1.5 percent to $1.5905, the highest since the single European currency was launched in 1999.
The dollar plummeted against the yen and euro on investor fears that more financial institutions could become casualties in the widening U.S. financial crisis that led to JPMorgan Chase (JPM.N) acquiring investment bank Bear Stearns BSC.N.
Shinkin Central Bank's Yoshida said that the impact of any intervention would likely increase if authorities were to buy dollars against both the yen and the euro.
Traders said the foreign exchange market was in a near state of panic, and some said coordinated dollar-buying intervention may conceivably happen as soon as markets in London open on Monday.
"Solo intervention by Japan seems difficult, but given this market turmoil, the US and Europe could move and conduct coordinated intervention in the currency market," said a senior options trader at a Japanese bank in Tokyo.
There was still some skepticism, however, about the likelihood for joint central bank intervention.
"The Fed's dollar position has been relaxed so far, and will most probably remain so," Benedikt Germanier, currency strategist at UBS said in a research note.
"Joint intervention seems also less likely as the ECB is busy managing inflation expectations," he said, adding that the last joint intervention had taken place in September 2000 to stem a decline in the euro.
In addition, Japanese authorities had "failed to draw a line in the sand", he said.
"The risk of an indifferent position will be a disorderly fall in the dollar accompanied by a further decline in U.S. equities and sharply rising yields. This would have very negative consequences on the real economy as well," Germanier added.
(Additional reporting by Rika Otsuka, Akiko Ishiwata and Eric Burroughs; Writing by Masayuki Kitano; Editing by Rodney Joyce, Gary Crosse)