The Japanese yen strengthened broadly as widening losses in credit markets prompted investors to reduce holdings of high-yielding assets funded by loans in Japan. Shares of Bear Stearns Cos. tumbled on speculation the company lacks sufficient access to capital. However, a Bear Stearns spokesman said there is ‘no truth’ to the liquidity rumor.

The single currency retreated against the dollar from 1.5407 to 1.5312 after European Central Bank President Jean-Claude Trichet said the central bank is concerned about excessive exchange-rate moves. Trichet said ‘excessive volatility and disorderly movements in the exchange rates are undesirable for economic growth’.

The greenback fell versus the Japanese yen and Swiss franc from 102.65 to 101.55 and from 1.0257 to 1.0172 respectively. The British pound retreated from 2.0221 to 2.0088. Australian dollar and New Zealand dollar dropped against the greenback from 0.9312 to 0.9160 and from 0.7964 to 0.7876 respectively.

Goldman Sachs said in a research note Monday an emergency Fed cut is possible ahead of March 18. It changed its view on Fed policy on Friday after the U.S. payrolls data. Interest-rate futures showed an 88% chance the Fed will cut its benchmark rate to 2.25% on March 18,

Tuesday will see the release of U.K. BRC retail sales and RICS house prices, German WPI, U.K. DCLG house prices, German and eurozone ZEW survey, U.S. trade balance and U.K. leading indicators.