Dollar Drops on Trouble at Bear Stearns

The euro traded for an all-time high $1.5657 surpassing a previous peak of $1.5625 that it hit on Wednesday.

A slight retrenchment by the dollar after a report showed that euro-zone inflation reached a hefty 3.3 percent in February was lost on the news from Bear Stearns.

The U.S. government and JPMorgan Chase & Co. bailed out Bear Stearns Cos. Friday, a last-ditch effort to save the investment bank after a week of denials that it was in trouble. JPMorgan Chase is providing secured funding to Bear for 28 days, backstopped by the Federal Reserve Bank of New York.

Bear Stearns lost half of its value within 30 minutes of the market open.

Ashraf Laidi, chief foreign exchange strategist for CMC Markets in New York, pointed to "speculation that the world's major central banks will mount coordinated intervention to stabilize the rout of the dollar."

"Considerable talk of possible coordinated intervention ... is making the market somewhat jittery about putting on additional short dollar trades" versus other major currencies, said Greg Anderson, currency strategist at ABN Amro in Chicago.

The dollar, which on Thursday fell below 100 Japanese yen for the first time since late 1995, again dipped as low as 99.85 yen Friday, but clawed back some ground and traded at 100.11 before noon.

The British pound rose to $2.0344 from the $2.0292 it bought in New York late Thursday.

The dollar has been weighed down by worries about the outlook for the U.S. economy, which in turn have fed expectations that the Federal Reserve will continue to lower interest rates.