FOREX-Dollar in a tailspin despite Fed action
(Changes byline, updates prices, adds quotes)
LONDON, March 17 (Reuters) - The dollar plumbed fresh depths across the board on Monday as liquidity-boosting measures launched by the Federal Reserve over the weekend failed to quell worry about the health of the U.S. economy and financial sector.
Stricken Bear Stearns is being bought by rival JP Morgan Chase for just $2 a share -- versus Friday's closing price above $30 -- in a sign that even heavyweights of the financial sector can be brought down by U.S. subprime mortgage debt and the resulting credit crunch which took hold last summer.
The Federal Reserve took more emergency measures to stem the fast-spreading financial crisis, cutting its discount rate by 25 basis points to 3.25 percent on Sunday and opening up discount window lending to major investment banks, a tool not used since the Great Depression.
But the moves did not stop the dollar from tumbling as much as 3 percent to below 96 yen, its lowest since 1995 and bringing year-to-date losses to more than 13 percent.
"The dollar is suffering from the dual shock of an economic slowdown and a financial crisis," said Teis Knuthsen, head of FX research at Danske Markets in Copenhagen.
"Until we see signs of an improvement on one of these two fronts, ideally both, then the dollar will remain under more pressure," he added.
The dollar fell as low as 95.77 yen according to Reuters data JPY=, and set a historic trough at 0.9637 Swiss francs CHF= after breaking below parity last week.
Implied volatility -- a key component of option prices -- in dollar/yen surged to its highest levels in around a decade both on the one-week JPYSWO= and one-month JPY1MO= horizon.
The euro rose as high as $1.5904, having already added around 4 percent in the first two weeks of March, roughly doubling its year-to-date gains EUR=. It later pared those gains to $1.5768 by 1121 GMT.
INTERVENTION?
The rapid dollar falls also fanned talk of possible co-ordinated dollar-buying intervention from major central banks, or at least of increased rhetoric in criticism of the currency moves.
"From the ECB point of view, these are moves which are not easy to ignore," Dresdner Kleinwort currency strategist Michael Klawitter said.
Central banks in Europe, Japan and the U.S. last jointly intervened in September 2000, propping up the euro after the currency hit an all-time low below $0.85, a loss of nearly 30 percent of its value since its January 1999 launch. Continued...
