Nikkei says Europe and Japan planned dollar rescue

TOKYO (Reuters) - The United States, Europe and Japan planned joint intervention to rescue the dollar when it was plunging in March at the time U.S. investment bank Bear Stearns collapsed, the Nikkei business newspaper reported.

Officials from the U.S. Treasury Department, Japan's Finance Ministry and the European Central Bank reportedly drew up a currency contingency plan over the weekend of March 15-16, the Nikkei said, citing sources familiar with the situation.

Analysts said even though a rescue never took place, any such agreement on intervention would be important in the future if the dollar were to tumble again or other exchange rates move very sharply.

The officials did not specify levels for initiating the dollar rescue plan, but in the event of a free-fall they agreed to coordinate aggressive buying of the greenback and sell yen and euros the newspaper said.

"If downside risks to the dollar emerge from here on, the market will keep in mind the possibility of similar action by authorities," said Takahide Nagasaki, chief foreign exchange strategist for Daiwa Securities SMBC.

The Nikkei report had little immediate impact on currencies, since the dollar has already rebounded 10 percent from a record low it struck against a basket of major currencies in March, analysts said.

"The report would have had a huge psychological impact if it had come out when the dollar was trading around 100 yen," said Tomoko Fujii, head of economics and strategy for Japan at Bank of America.

The United States, Europe and Japan have not intervened jointly in the currency market since September 2000 when they acted to prop up a sliding euro. Japan's last intervention was in March 2004.

Even as the dollar slid after the flare-up of the credit market turmoil last August, there had been a perception among market players that U.S. authorities were willing to tolerate falls in the dollar in a policy of "benign neglect", to help support U.S. exports as the economy faltered.