The dollar hit a 2-1/2 year low against the yen and a record low versus the Swiss franc on Wednesday, hurt by fears of a US recession and speculation about an early Federal Reserve interest rate cut.
A dismal reading of December retail sales on Tuesday suggested the US economy might be facing deeper problems, and tumbling global stock markets fuelled market rumours that the Fed was holding an emergency meeting to cut rates immediately.
A Fed spokeswoman declined to comment on the rumours. Market players said more dollar selling could come on the back of weak bank earnings after Citigroup reported its first quarterly loss since its establishment in 1998. J.P. Morgan Chase & Co plans to announce results later in the day and Merrill Lynch & Co Inc on Thursday.
The US unit lost 0.6 percent against the yen from late US trade on Tuesday at 106.05 yen. It fell as low as 105.97 on electronic trading platform EBS, the lowest since May 2005. "Even an emergency rate cut by the Fed itself may not work to stop these jitters in the market unless it slashes rates as much as 75 basis points as futures are being priced in," said Kosuke Hanao, head of forex sales for HSBC in Tokyo.
"Dollar could tumble straight to a psychologically key 105 yen and even to 102 yen in near-term if the market condition is kept in the status quo." The euro was up 0.2 percent to $1.4845, but off a seven-week peak of $1.4923 hit the previous day and a record high of $1.4968 struck in November.
The dollar fell 0.7 percent against the Swiss franc to 1.0848 Swiss franc, near record lows. US interest rate futures markets were reflecting a 50-50 chance of the Fed lowering interest rates by three-quarters of a percentage point by the end of this month.