The dollar plunged today hitting a new record low against the euro and falling below 100 yen for the first time in over a decade as worries deepened on Wall Street that the United States had entered a recession.
The dollar also hit a record low against a basket of major currencies and oil and gold hit all-time highs. Data showing US retail sales fell unexpectedly last month added to the concerns about the economy.
"The slowdown that we know is happening in the banks has manifested itself on Main Street. These economic numbers are going to get much worse," said Joe Francomano, vice president for foreign exchange at Erste Bank in New York.
The dollar fell overnight to 99.77 yen, its lowest level since 1995, before recovering to around 100.45 yen in early New York trade, about 1 per cent weaker on the day.
The euro hit a fresh record high at $1.5624 before easing to $1.5575, little changed on the day.
So far this year, the dollar has shed nearly 10 per cent against the yen. Today's dip below the 100 level stirred fears in some quarters that Japan could intervene in the currency market to cap yen gains that threaten to undermine exports, damaging corporate profits.
Those concerns sent the benchmark Nikkei share average down 3.3 per cent today, leaving it down nearly 20 per cent so far in 2008.
Japan has a long history of intervening in currency markets to protect exporters from an excessively strong yen, though it has not done so over the last four years, which have seen the economy pull out of a decade-long deflationary slump.
Japanese officials, including Prime Minister Yasuo Fukuda, have said excessive foreign exchange moves were undesirable, though Finance Minister Fukushiro Nukaga added on Thursday that the latest moves reflected dollar weakness rather than yen strength.
The dollar also hit a record low at 1.0047 Swiss francs. The franc also rose against the euro, helped when the Swiss National Bank's opted to hold its target Libor rate steady today.