LONDON, March 17: The dollar plunged to a new trough against the euro on Monday, undermined by the collapse of US bank Bear Stearns, which powered oil and gold to record heights as investors sought refuge from turbulence.

Equity markets in Asia and Europe also took a drubbing on fears that more big-name US banks could be vulnerable to the credit crisis that sank Bear Stearns and prompted the US Federal Reserve to resort to emergency measures.

The single European currency soared to a record $1.5905 in Asian trading before falling back to $1.5751 in late European trading, against $1.5669 late Friday.

The dollar was meanwhile trading at 96.90 yen after 99.18 on Friday.

Gold too was in demand, with the price of the precious metal jumping at one point to an unprecedented $1,032.70 an ounce.

In a rare weekend announcement, the US Federal Reserve said it was cutting its primary credit rate, offered at the Fed’s discount window for institutions “in sound condition,” by a quarter point to 3.25 percent.

The surprise move came amid growing concerns about the health of the US financial system following the pressures on Bear Stearns.

The bank, the fifth largest US investment house, was finally bought up by JPMorgan Chase for just $236 million, a fraction of its stock market value of $3.54 billion on Friday.

Analysts said the rate cut by the Fed underscored the extent of the problems facing the world’s largest economy, brought on by a housing slump and credit crunch following a wave of defaults on subprime, or high-risk, mortgages.

“The Federal Reserve’s first rescue of a broker since the Great Depression has heightened investor fears that the fallout from the credit market crunch has much further to go,” noted NAB Capital analyst John Kyriakopoulos.

Added Mitul Kotecha of Calyon: “Although the Fed’s measures can be characterised as significant and perhaps even bold, the bottom line is that they are failing to get to the root of the credit problem.

But he added that the Fed is confronted with “a lose-lose situation.”

On the London Bullion Market, the price of gold at the fixing was at $1,011.25 per ounce, up from $1,003.50 late on Friday.—AFP