The Dollar fell against the Yen on Wednesday, as investors remained bearish on the US currency amid concerns about the health of the U.S. economy and financial system.

The dollar recovered from the day's lows however, in part bolstered by news that regulators have lifted capital limits on mortgages that Fannie Mae and Freddie Mac may purchase. That could free up as much $200 bio in liquidity for the stricken mortgage market. Still, the news was not enough to completely offset the overall negative market sentiment on the Dollar, as US interest rates were still seen heading lower even after a 75bp easing to 2.25% by the Federal Reserve on Tuesday.

Yesterday, UsdJpy was down 1.21% at 98.65, trimming losses following the Fannie and Freddie announcement. It hit a 13-year low 95.74 on Monday. UsdChf was also down 0.29% at 0.9967, way above record lows at 0.9639 from Monday. EurUsd was down 0.11% at 1.5637, down from the intraday high 1.5785. EurUsd touched a record peak of 1.5904 Monday.

Analysts say the outlook for the Dollar remains weak, with lower interest rates set to further cut the currency's yield appeal. In its statement on Tuesday, the Fed indicated it could cut rates again, even though two voting members dissented against the depth of the latest move. The rate futures market has priced in a 58% chance of a 50bp cut to 1.75%, down from about 94% earlier.

Tuesday's rate cut is the latest in a series of emergency measures undertaken by the Fed to prevent the credit crisis from escalating. On Sunday, the Fed cut its discount rate by a 25bp to opened up discount window lending to major investment banks, a tool not used since the Great Depression. But these measures did little to ease the market's concerns.

Sterling, meanwhile, fell as minutes from the Bank of England's Monetary Policy Committee showed two of nine policymakers favored a rate cut this month, which added to speculation that UK rates are heading lower soon. GbpUsd fell as low as 1.9803 before trading back up at 1.9833, down 1.27%.

UsdCad gained 2.23% to 1.0119 on concerns that problems in the US economy will seep through to the Canadian economy.