(Recasts, updates prices, adds comment, detail)
By Steven C. Johnson
NEW YORK, March 10 (Reuters) - The dollar tumbled against
the yen on Monday as fears of a U.S. recession hit stock prices
but steadied versus the euro after Europe's top monetary
official said he was worried about recent exchange rate moves.
A report on Friday showing the U.S. economy unexpectedly
shed 63,000 jobs last month extended a dollar swoon that began
in late February, taking it to record lows against the euro and
Swiss franc and an eight-year trough versus the yen.
Dollar weakness against the Japanese currency continued on
Monday as risk aversion returned, sending Japan's benchmark
Nikkei stock index <> to its lowest level in 2-1/2 years.
The greenback hit a session low of 101.57 yen <JPY=>, just
shy of Friday's eight-year low around 101.40 yen, before edging
back to 101.90 yen, down 0.8 percent on the day.
Some of the yen's gains dissipated after a Bear Stearns
executive dismissed talk of liquidity concerns at the Wall
Street firm.
Still, traders said they were keeping an eye on the 100 yen
per dollar level last seen more than a decade ago.
"The elevated state of nervousness in the market means a
move to 100 yen looks inevitable," said Omer Esiner, market
analyst at Ruesch International in Washington. "An announcement
from a financial firm about new credit losses could be enough
to tip the scales for a run toward 100."
The dollar also fell 0.8 percent to 1.0195 Swiss francs
<CHF=>.
The euro also fell 1 percent against the yen <EURJPY=> and
faltered against the dollar after European Central Bank
President Jean-Claude Trichet said the central bank was
concerned about "excessive exchange rate moves."
The common currency briefly fell to $1.5314 <EUR=> before
regrouping to $1.5350, little changed on the day.
The euro hit a lifetime high of $1.5459 on Friday, capping
a week of sharp gains against the U.S. currency. It has
strengthened by 5 percent against the greenback in 2008 and is
17 percent stronger over the last 12 months.
"Trichet expressed concern but his comments were pretty
mild, so if anything, I think they provided a bit of an excuse
to test the euro's downside," Esiner said. "But U.S. economic
fundamentals suggest the dollar is likely to remain at
depressed levels for some time."
John McCarthy, vice president of foreign exchange at ING
Capital Markets, said the dollar's failure to post bigger gains
against the euro after Trichet's remarks show there's little
appetite to hold the greenback. "People are taking risk off the
table," he said.
A spate of dismal U.S. economic data, capped by Friday's
payrolls report, has stoked recession concerns and left
investors ready for more Fed interest rate cuts, either at the
central bank's next policy meeting on March 18 or sooner.
Goldman Sachs said in a research note Monday an emergency
Fed rate cut is possible ahead of March 18, saying it changed
its view on Fed policy on Friday after the U.S. payrolls data.
The ECB, on the other hand, has held euro zone interest
rates firm at 4 percent, and before Monday, Trichet had focused
mainly on the upside inflation risks to the euro zone economy.
And while euro zone growth is slowing relative to last
year, analysts at Lombard Street Research in London say there
is little evidence that the ECB needs to mimic the Fed's recent
series of rate cuts.
"The general drift will continue to be weakness in the
dollar. There are some tough levels for the markets to get
through ... but not barriers that I think the market will fall
over at," said Steve Barrow, chief currency strategist at Bear
Stearns in London.
(Additional reporting by Toni Vorobyova in London; Editing by
Kenneth Barry)
