(Updates figures, fresh quote, adds Taiwan, Hong Kong)
By Tom Miles
HONG KONG, March 13 (Reuters) - The dollar teetered on the
brink of the 100 yen mark on Thursday as doubts set in about
the U.S. Federal Reserve's latest bid to support credit
markets, sending stocks tumbling and keeping oil close to $110
a barrel.
The Fed's offer 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
worries about the U.S. economy flooded back on Thursday.
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 $109.59 in Asian trade. Gold firmed above $985 an
ounce, within sight of a record $991.90 struck on March 6.
Financial bookmakers expected Britain's FTSE 100 <>
and Germany's DAX <> to open down as much as 1.6 percent
and France's CAC 40 <> to fall about 2 percent.
"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
sharply.
MSCI's index of Asian markets outside Japan <.MIAPJ0000PUS>
shed 3.1 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, closed 3.3 percent lower. The index
has lost almost a third of its value since the end of July last
year.
"I'd say about 70 percent of the selling today was based on
U.S. factors, with the other 30 percent coming from Japan,"
said Yoku Ihara, manager of the investment information
department at Retela Crea Securities.
"The Fed has been doing various things to solve the credit
crisis but nothing's been working."
The high oil price hit Asian airlines such as Korean Air
<003490.KS>, which plunged 8.3 percent after the chief
executive warned employees that business conditions were bad.
Qantas <QAN.AX> fell 4.2 percent while Singapore Airlines
<SIAL.SI> slid 3.2 percent and Japan Airlines Corp <9205.T> and
All Nippon Airways Co Ltd <9202.T> lost around 2 percent.
The unrelenting surge in crude prices also hit Asia's top
oil refiner, Sinopec Corp <0386.HK>, which is obliged to sell
refined fuel at state-capped prices in China and has to absorb
the cost of crude. It fell more than 8 percent, dragging down
Hong Kong's Hang Seng index <>, which fell 3.9 percent.
Even Taiwan's main TAIEX index <>, one of the most
resilient indexes so far this year, dipped 2.7 percent as the
resignation of Taiwan's finance minister dented confidence.
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 & Kim Coghill)
