Dollar Pares Decline; Fed Cuts Discount Rate, Expands Lending

By Stanley White and Kosuke Goto


March 17 (Bloomberg) -- The dollar pared losses, rebounding from a record low against the euro and Swiss franc, after the Federal Reserve cut its discount rate to 3.25 percent and said primary dealers can exchange a ``broad range'' of collateral.

The U.S. currency recovered from a 12-year low against the yen after JPMorgan Chase & Co. said it will buy Bear Stearns Cos. after it joined forces with the New York Federal Reserve to bail out the bank on March 14. The Fed extended the duration of loans at the discount rate as the U.S. central bank battles to restore confidence in global credit markets in the wake of widening losses on subprime mortgages.

``The Fed's cuts as well as JPMorgan's buying of Bear Stearns should be catalysts for dollar buying,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``This gives us the impression the Fed is doing everything it can do, reducing concerns over credit risks.''

The dollar traded at 98.87 yen at 8:25 a.m. in Tokyo, up from a 12-year low of 98.11 reached earlier today. Against the euro, the dollar traded at $1.5707, after reaching a record low of $1.5748. The dollar pared its loss against the Swiss franc, trading at 0.9936, up from a record low of 0.9863.