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NEW YORK: The US dollar slumped against the euro and the British pound on Monday as measures to relieve the crisis-stricken financial sector helped boost the European currencies, dealers said.
In late New York trading, the euro climbed to 1.3576 dollars from 1.3394 dollars in New York on Friday.
Sterling rallied against the dollar after the British government said it would invest up to 37 billion pounds (47 billion euros, 64 billion dollars) in ailing British banks Royal Bank of Scotland, HBOS and Lloyds TSB.
Against the Japanese currency meanwhile, the dollar firmed to 102.01 yen from 100.51 yen on Friday.
Last week, the dollar and the yen had risen strongly as investors sought out safe havens amid chaos on financial markets.
"Governments now realise that guaranteeing interbank lending is crucial to improve financial market conditions," analysts at French investment bank BNP Paribas said in a statement.
"This decision hits at the centre of the credit problem and should have a more positive impact on the markets than the coordinated (interest) rate cuts had last week."
G7 finance chiefs said on Friday in a joint statement they would use "all available tools" to support major banks and prevent their failure as part of efforts to shore up the ailing global financial system.
Then in Paris on Sunday, governments from the 15 nations that use the euro currency promised to tackle the ongoing crisis together, buying into banks and guaranteeing interbank lending to help increase liquidity.
"We see events over the weekend as a positive for the euro, pound ... and a negative for the US dollar and Japanese yen," said a note from Barclays Capital on Monday.
Global stock markets soared on Monday, with double-digit percentage gains in the US, Europe and Hong Kong, after world leaders agreed to pump hundreds of billions of extra dollars into banks crippled by the credit crunch.
At the same time, central banks in Europe fired a new broadside to free up frozen lending by providing commercial banks with unlimited amounts of dollars in a joint operation.
The Bank of England, European Central Bank and Swiss National Bank will loan dollars to commercial banks for periods of seven, 28 and 84 days.
In late trading in New York, the euro changed hands at 1.3576 dollars against 1.3394 late Friday, at 138.50 yen (134.88), 0.7832 pounds (0.7857) and 1.5451 Swiss francs (1.5249).
The dollar stood at 102.01 yen (100.51) and 1.1379 Swiss francs (1.1376).
The pound was at 1.7331 dollars (1.7051). - AFP/de
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