By Steven C. Johnson

NEW YORK (Reuters) - The dollar fell below 99 yen and hit a record low against the euro after Bear Stearns said a worsening cash position forced the Wall Street firm to secure emergency financing.

News that the New York Federal Reserve and J.P. Morgan Chase were to provide funds for the fifth-largest U.S. investment bank signalled more credit turmoil to come and added to investor fears that the economy is in for a long recession.

"People are starting to talk about whether this is a signal of a systematic problem in the U.S. banking sector, and that's why we're seeing selling of dollar across the board," said Greg Salvaggio, currency trader at Tempus Consulting in Washington.

The question on traders' minds now, said Omer Esiner, a market strategist at Ruesch International in Washington, is "which of the other big firms out there need similar funding."

The dollar plunged to 98.91 yen its lowest level in 12-1/2 years, before edging back to 99.310 yen, down 1.1 percent. It was down nearly 11 percent against the yen so far in 2008.

The euro hit $1.5688, an all-time high, before easing to $1.5669, up 0.2 percent. The dollar fell below parity with the Swiss franc for the first time ever, trading at 0.9976 francs, according to EBS, before easing to 0.9984 francs.

Analysts said the dollar is likely to remain on the ropes because the Fed may have to do much more to ease market nerves, either by cutting interest rates even more aggressively or by taking additional measures to inject liquidity

"It wouldn't surprise me if the Fed signals some more aggressive action or if something happens over the weekend," Salvaggio said. "And the dollar is going to bear the brunt of that. I think we very possibly could see the euro at $1.60."