Dollar stays weak near Euro record high and Yen 2 ½ year low

The Dollar slid further to a fresh 2-1/2-year low against the Yen on Monday in line with falls in US equities, as renewed credit worries affirmed expectations that more US rate cuts are imminent. Investors are on edge about fallout from the credit crunch as the approaching year-end may force them to dump assets or scramble for cash to get books in order in strained markets. Worries about the US economy and expectations for additional Federal Reserve interest rate cuts have caused the Dollar's broad tumble. Yesterday, UsdJpy dropped to 107.22, the lowest since June 2005, before closing at 107.35 -0.88%. EurJpy went down 0.62% to 159.72. The focus has also been on the reemergence of money market strains, with the European Central Bank and the Federal Reserve announcing measures to mitigate liquidity pressures around the year-end, said Analyst. The interest rate futures market has fully priced in a 0.25% monetary policy easing by the Fed when it next meets on Dec. 11, to 4.25% and show a 20% implied chance it could cut rates by a 0.5% instead. London Inter-bank offered rates for two-month Euro deposits rose to new 6-1/2-year highs on Monday and three-month Euro rates rose for a ninth straight session on persistent concerns over banks' year-end funding. Two-month and three-month Dollar Libor rates also rose to their highest in a month. The Fed and the ECB on Monday sought to calm stressed money markets by promising banks extra money to help them cope with a possible year-end cash squeeze. EurUsd was up 0.26% at 1.4877, within sight of the lifetime high of 1.4967 set on Friday. A growing number of analysts suggest the exchange rate will breach the psychologically key 1.5000 level this year. European officials have increasingly expressed concern about the Euro's rapid rise and the potential drag on exporters. ECB Governing Council member Nout Wellink said on Monday its rise against the Dollar was not of "immediate concern" for European exporters but a further ascent would be "worrying".