The dollar tumbled against the yen Monday as fears of a U.S. recession hit stock prices but steadied versus the euro after Europe's top monetary official said he was worried about recent exchange rate moves.
A report on Friday showing the U.S. economy unexpectedly shed 63,000 jobs last month extended a dollar swoon that began in late February, taking it to record lows against the euro and Swiss franc and an eight-year trough versus the yen.
Dollar weakness against the Japanese currency continued on Monday as risk aversion returned, sending Japan's benchmark Nikkei stock index to its lowest level in 2-1/2 years.
The greenback hit a session low of 101.57 yen, just shy of Friday's eight-year low around 101.40 yen, before edging back slightly.
Some of the yen's gains dissipated after a Bear Stearns executive dismissed talk of liquidity concerns at the Wall Street firm.
Still, traders said they were keeping an eye on the 100 yen per dollar level last seen more than a decade ago.
"The elevated state of nervousness in the market means a move to 100 yen looks inevitable," said Omer Esiner, market analyst at Ruesch International in Washington. "An announcement from a financial firm about new credit losses could be enough to tip the scales for a run toward 100."
The dollar also fell slightly versus the Swiss francs .
The euro also fell against the yen and faltered against the dollar after European Central Bank President Jean-Claude Trichet said the central bank was concerned about "excessive exchange rate moves."
The common currency briefly fell to $1.5314 before regrouping to trade little changed on the day.
The euro hit a lifetime high of $1.5459 on Friday, capping a week of sharp gains against the U.S. currency. It has strengthened by 5 percent against the greenback in 2008 and is 17 percent stronger over the last 12 months.
"Trichet expressed concern but his comments were pretty mild, so if anything, I think they provided a bit of an excuse to test the euro's downside," Esiner said. "But U.S. economic fundamentals suggest the dollar is likely to remain at depressed levels for some time."
John McCarthy, vice president of foreign exchange at ING Capital Markets, said the dollar's failure to post bigger gains against the euro after Trichet's remarks show there's little appetite to hold the greenback. "People are taking risk off the table," he said.
A spate of dismal U.S. economic data, capped by Friday's payrolls report, has stoked recession concerns and left investors ready for more Fed interest rate cuts, either at the central bank's next policy meeting on March 18 or sooner.
Goldman Sachs said in a research note Monday an emergency Fed rate cut is possible ahead of March 18, saying it changed its view on Fed policy on Friday after the U.S. payrolls data.
The ECB, on the other hand, has held euro zone interest rates firm at 4 percent, and before Monday, Trichet had focused mainly on the upside inflation risks to the euro zone economy.
And while euro zone growth is slowing relative to last year, analysts at Lombard Street Research in London say there is little evidence that the ECB needs to mimic the Fed's recent series of rate cuts.
"The general drift will continue to be weakness in the dollar. There are some tough levels for the markets to get through ... but not barriers that I think the market will fall over at," said Steve Barrow, chief currency strategist at Bear Stearns in London.