Paul Chertkow, head of currency research at UBS, said: ``The dollar is falling over the precipice of a crisis of confidence.'' He said the market saw it as a one-way bet, with little risk that the Fed would defend the currency with either a sharp rise in interest rates or intervention. Other analysts agreed that the US exchange rate against the yen and mark would fall further, with a strong possibility it would pass its record low of 1.3860 to the mark. American hedge funds and banks are reported to be selling dollars, while Japanese institutions are said to be repatriating yen as their financial year-end approaches.
The dollar touched a new post-war low against the yen yesterday, and traders said the US currency's slide would continue. It closed last night in New York at Y95.22, below the November 1994 low of Y96.03 and more than 6 per cent down from the level at which it started the year. The dollar also eased against sterling, ending at $1.6130, off 2.75 cents, and at DM1.4430, down 1.93 pfennigs.