(Updates figures, adds detail)
By Tom Miles
HONG KONG, March 13 (Reuters) - The dollar hit a record low
against the euro and a 12-year low against the yen on Thursday
and shares fell as euphoria subsided about the latest helping
hand from the U.S. Federal Reserve and reality -- $110 oil and
recession fears -- returned.
The Fed's attempt to ease credit market strains by offering
to accept mortgage bonds as collateral had sparked the biggest
daily gains for five years on the Dow Jones industrial average
<> and Nasdaq <> on Tuesday, but nagging worries about
the state of the U.S. economy overcame that initial optimism.
The fall in the dollar helped U.S. crude oil <CLc1> break
above $110 a barrel for the first time, although it trickled
back to $109.49 in Asian trade. Gold held steady around $984 an
ounce, within sight of a record $991.90 struck on March 6.
"There remains a degree of caution as we are seeing a
perfect storm of economic recession factors hitting the U.S.
and that's creating uncertainty despite the fact that the Fed
has come up with rather creative and elegant ideas," said
Savanth Sebastian, equities economist at CommSec.
"Credit markets remain very tight although the Fed has
created a market for some of those assets at the heart of the
credit crisis."
The New York Board of Trade's U.S. dollar index <.DXY>
struck an all-time low of 71.990 as the dollar tumbled to a
12-year low as far as 100.03 yen <JPY=>, while the euro <EUR=>
hit a new high of $1.5587.
The slide came despite remarks from U.S. President George
W. Bush on Wednesday that he would like to see a stronger
dollar and expressed concern its falling value was one cause of
soaring U.S. energy prices. []
The dollar could continue to fall unless authorities act
further to ease concerns about the U.S. housing sector and
ailing credit markets, said Tomoko Fujii, head of economics and
strategy for Japan at Bank of America.
"There is no reason to buy the dollar," Fujii said. "It's
not as if the U.S. government is going to step in and buy up
every mortgage," she added.
SAFE HAVENS
Asian stock markets, wracked for months by fear of a U.S.
recession that could damage the region's exporters, fell.
MSCI's index of Asian markets outside Japan <.MIAPJ0000PUS>
shed 2.9 percent, dragged down by financial firms such as
Macquarie Group <MGQ.AX>, Australia's top investment bank,
which fell 8.4 percent.
Japan's Nikkei average <>, which had taken some heart
from the Fed's initiative, slumped 3.5 percent by 0528 GMT on
Thursday. The index's fall has now lost almost one third of its
value since the end of July last year.
"Perception that the Fed was just buying time with the cash
injections pervades the market. Investors are aware it has not
helped solve the fundamental problems," said Kim Joon-kie, an
analyst at SK Securities.
"Investors are taking a wait-and-see stance, as the Fed is
set to hold its interest rate meeting next week, and as Wall
Street banks release earnings in the coming weeks," he added.
The high oil price hit Asian airlines such as Korean Air
<003490.KS>, which plunged 10 percent after the chief executive
warned employees that business conditions were bad.
Qantas <QAN.AX> fell 4.2 percent while Japan Airlines Corp
<9205.T>, All Nippon Airways Co Ltd (ANA) <9202.T>, and
Singapore Airlines <SIAL.SI> all fell around 2 percent.
Flagging enthusiasm for the Fed's initiative also lifted
Japanese government bonds, driving 10-year futures <2JGBv1> to
a two-year high.
"The Fed's latest measure was seen as ineffective in
resolving the credit market strains, keeping intact investors'
flight-to-quality preference," said Akihiko Yokoyama, chief JGB
strategist at JPMorgan Securities.
(Additional reporting by Park Jung-youn in SEOUL; Masayuki
Kitano and Chikako Mogi in TOKYO; Geraldine Chua in SYDNEY;
Editing by Jean Yoon)
