Dollar Declines to 12-Year Low Against Yen on Credit Losses

The dollar fell to a 12-year low against the yen on speculation more banks will report credit- market losses after JPMorgan Chase & Co. and the New York Federal Reserve bailed out Bear Stearns Cos.

The U.S. currency also traded near a record low against the euro as traders speculated the Fed will slash interest rates one percentage point this week to avert a recession. The dollar set record lows against the euro the past four days as investor confidence tumbled, sending U.S. stocks lower for a third straight week and driving gold to a record high of $1,009 an ounce.

The U.S. dollar will remain under pressure, Benedikt Germanier and Alina Anishchanka, strategists at UBS AG, the world's second-biggest foreign-exchange trader wrote in a March 14 week-ahead report. Easing monetary policy, ongoing uncertainties in the financial sector and rising fears of capital outflows are chief reasons for our short-term bearish outlook.

The dollar sank to as low as 99.08 yen in Wellington after reaching 98.90 yen on March 14, the lowest since September 1995. It lost 3.5 percent last week, the most since November.

The U.S. currency traded at $1.5677, after reaching $1.5652, the weakest since the European currency's 1999 debut. It fell 2 percent last week, its fifth straight decline, the longest slide since November.

The dollar has lost about 16 percent against the euro and 15 percent versus the yen in the past year as the worst housing slump since 1991 forced the Fed to cut its benchmark rate 2.25 percentage points to bolster the economy, lowering returns on dollar deposits.

Bear Bailout

The New York Fed agreed to provide financing through JPMorgan for up to 28 days after Bear Stearns said its liquidity position had significantly deteriorated. Bear Stearns shares fell 47 percent in New York trading.

The likelihood the Fed will cut its target by one percentage point to 2 percent at the March 18 meeting rose to 54 percent yesterday, from 6 percent a week earlier, futures on the Chicago Board of Trade showed. The balance of bets is on a cut to 2.25 percent. The euro region's main rate is 4 percent.