The dollar nose-dived to its lowest levels in 12 1/2 years Monday in Asia, falling below 96 yen as the Federal Reserve's rate cut failed to calm market fears about more U.S. bank writedowns.

The Fed on Sunday cut its discount rate, or its lending rate to financial institutions, by a quarter point to 3.25%.

The move only managed to give a temporary lift to the U.S. currency before it began its steep decline.

"The Fed's action is needed but it leaves the current main market problems unresolved, and there seems to be nothing that can stop this (dollar-selling) flow for now," said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland.

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The dollar fell to 95.72 yen, its lowest point since August 1995, in morning trade in Tokyo before recovering to 96.84 in the afternoon. Late Friday in New York the dollar was trading at 99.17 yen. It broke below 100 yen just last Thursday.

The euro also rose to a record against the dollar, climbing as high as $1.5851 from $1.5676 Friday.

News that JPMorgan Chase (JPM, Fortune 500) had bought rival investment bank Bear Stearns (BSC, Fortune 500) - a move aimed at averting a bankruptcy - also sparked renewed market worries about the extent of the credit crisis, sending Asian stocks tumbling.

Japan's benchmark Nikkei 225 stock index fell 3.71%, or 454.09 points, to close at 11,787.51.

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