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“The speed of the slide in the dollar/yen is so rapid that U.S. action alone can no longer stop the dollar’s downward trend,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investment.

“The time is ripe for coordinated intervention by U.S., European and Japanese authorities.”

Remarks on Monday by Japanese Finance Minister Fukushiro Nukaga also kept investors on their toes.

“We will cooperate with European and U.S. currency authorities and will monitor markets very carefully,” Nukaga told reporters, adding that the latest moves in currency markets had been excessively volatile and that he would watch markets carefully.

Nukaga’s comments gave a slight lift to the dollar, which last traded near 97 yen after earlier dropping by over 3 percent to a 13-year low of 95.77 yen on electronic trading platform EBS.

“His comments were different from usual so that led to some speculation about joint intervention,” said Hiroshi Yoshida, a forex manager at Shinkin Central Bank.

Crude for April delivery was up 95 cents at $111.16 a barrel by 10:35 p.m. EDT, after hitting $111.42 earlier. May London Brent crude was 55 cents higher at $106.75 a barrel.

In an unprecedented Sunday night announcement that underscores the depth of the market fears, the Fed said it has authorized a new lending tool to help its network of primary dealers — including firms that interact with the Fed daily but don’t fall under its direct supervision — to provide financing in securitization markets. Growing worries about securities backed by mortgages has been exacerbating the credit-market upheaval and threatening the overall economy.

The initiatives are “designed to bolster market liquidity and promote orderly market functioning.” the Fed said in a statement. “Liquid, well-functioning markets are essential for the promotion of economic growth.”

The Fed governors in Washington also approved a request by the Federal Reserve Bank of New York to lower the rate at which it lends directly to banks by a quarter percentage point to 3.25%. That narrows the gap between the discount rate and the federal funds rate, for overnight lending between banks, to a quarter point. It also extended the length of those direct loans to 90 days from 30 days.

The deal calls for J.P. Morgan to pay $2 a share in a stock-swap transaction, with J.P. Morgan Chase exchanging 0.05473 share of its common stock for each Bear Stearns share. Both companies’ boards have approved the transaction, which values Bear Stearns at just $236 million based on the number of shares outstanding as of Feb. 16. At Friday’s close, Bear Stearns’s stock-market value was about $3.54 billion. It finished at $30 a share in 4 p.m. New York Stock Exchange composite trading Friday.

Effective immediately, J.P. Morgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. The deal isn’t subject to any conditions, except shareholder approval. It is expected to close before the end of the second quarter.

Government regulators, including the Federal Reserve and the Office of the Comptroller of the Currency, have given their blessing to the transaction

Many well-known investors, from billionaire Joe Lewis to Bruce Sherman, the head of Legg Mason Inc.’s Private Capital Management Inc. money-management firm, have seen the value of their stakes in Bear Stearns plummet. The pain could be most acute for Bear Stearns’s employees, who are steeped in a culture of personal ownership — and hold about a third of the firm’s shares outstanding.

Through the weekend, Bear Stearns bankers were summoned to the company’s headquarters on New York’s Madison Avenue, where they were told to prepare lists of ongoing deals and business relationships. Representatives from prospective buyers circulated through conference rooms, with J.P. Morgan executives asking questions of Bear Stearns’s senior management. A separate bidding group, including J.C. Flowers & Co. and Kohlberg Kravis Roberts & Co., also was in the mix, said a person familiar with the discussions.

Bear Stearns shares, which traded as high as $170 in January 2007, fell 47% on Friday after the firm was forced to seek emergency funding from the Federal Reserve and J.P. Morgan to stay afloat amid a severe cash crunch.

One stumbling point for a sale appeared to be the amount of risk that J.P. Morgan would absorb in any type of transaction. While J.P. Morgan was eager to snap up some of Bear Stearns assets — such as its prime brokerage business that caters to hedge funds — Chief Executive Officer James Dimon was reluctant to pursue the deal without certain assurances that would protect his firm’s exposure, said people familiar with the matter. Spokesmen for Mr. Dimon couldn’t be reached yesterday.

Despite the emergency funding from J.P. Morgan and the Federal Reserve that was announced Friday and gives Bear access to cash for an initial period of 28 days, the clock is ticking on the 85-year-old firm. Late Friday, credit-ratings firms downgraded Bear Stearns to two or three levels above junk status. The downgrades also had a big impact on Bear Stearns’s viability, as they severely crimped the firm’s number of potential trading partners.

Regulators, bankers and investors are concerned Bear Stearns’s stock could plummet even further when the stock market opens today. A continued exodus by parties with which the investment bank trades could even cause it to collapse. Still, unwinding Bear Stearns could be a nightmare because of the plethora of Wall Street firms with which it has dealings.

Analysts and investors are bracing for more bad news as securities firms report earnings this week, though Bear Stearns’s results are expected to surpass the average estimate from analysts surveyed by Thomson Financial, say people familiar with the matter. A Bear spokesman declined to comment.

The price represents a startling 93 percent discount to Bear Stearns’ closing stock price on Friday on the New York Stock Exchange.

Bankers and policy makers raced to complete the deal before financial markets in Asia opened on Monday, as fears grew that the financial panic could spread if Bear Stearns failed to find a buyer.

The deal, done at the behest of the Federal Reserve and the Treasury Department, punctuates the stunning downfall of one of Wall Street’s biggest and most storied firms. Bear Stearns weathered the vagaries of the markets for 85 years, surviving the Depression and a dozen recessions only to meet its end in the rapidly unfolding credit crisis now afflicting the American economy.

Traders in all three centres were panicking even for those banks not directly exposed to Bear. They feared that the problems experienced at the stricken bank signalled that the credit crisis has deteriorated to a new level.

Yesterday, traders began to look anxiously at the robustness of Lehman Brothers, which, although bigger than Bear, is small compared with JPMorgan Chase, Morgan Stanley and Citigroup.

Shares in Lehman dropped 11 per cent yesterday, a far bigger fall than its other rivals, which saw their stock decline by about 3 per cent.

Although Lehman is more diversified than Bear, it has a similar investment profile, with huge holdings in mortgage-backed debt. Lehman sought to reassure the market when it said yesterday that it had secured a $2 billion (£1 billion) credit line with Paolo Tonucci, the bank’s global treasurer, calling it “a strong signal from the market and our key bank relationships”.

However, Chris Whalen, of the Wall Street consultancy Institutional Risk Analytics, said: “This is going to go all the way up the chain. There is a risk that all broker dealers are going to become an endangered species if the credit crisis is not sorted out. If they can’t fund themselves, they will have to shrink. All the other firms are in danger, too.”

The violence erupted just two weeks before China’s Summer Olympic celebrations kick off with the start of the torch relay, which passes through Tibet. China is gambling that its crackdown will not draw an international outcry over human rights violations that could lead to boycotts of the Olympics.

The latest unrest began Monday on the anniversary of a 1959 uprising against Chinese rule. Tibet was effectively independent for decades before communist troops entered in 1950.

Initially, the protests were led by Buddhist monks demanding the release of other detained monks. Their demands spiraled to include cries for Tibet’s independence and turned violent Friday when police tried to stop a group of protesting monks. Pent-up grievances against Chinese rule came to the fore, as Tibetans directed their anger against Chinese and their shops, hotels and other businesses.

It was the fiercest challenge to Beijing’s authority in nearly two decades.

China’s official Xinhua News Agency reported at least 10 civilians were burned to death on Friday. The Dalai Lama’s exiled Tibetan government in India said Chinese authorities killed at least 30 Tibetans and possibly as many as 100. The figures could not be independently verified.

In the Tibetan capital Lhasa on Saturday, police manned checkpoints and armored personnel carriers rattled on mostly empty streets as people stayed indoors under a curfew, witnesses said. The show of force imposed a tense quiet.

Several witnesses reported hearing occasional bursts of gunfire. One Westerner who went to a rooftop in Lhasa’s old city said he saw troops with automatic rifles moving through the streets firing, though did not see anyone shot.

Foreign tourists in Lhasa were told to leave, a hotel manager and travel guide said, with the guide adding that some were turned back at the airport.

“There are military blockades blocking off whole portions of the city, and the entire city is basically closed down,” said a 23-year-old Canadian student who arrived in Lhasa on Saturday and who was making plans to leave. “All the restaurants are closed, all the hotels are closed.”

Even as Chinese forces appeared to reassert control in Lhasa, a second day of sympathy protests erupted in an important Tibetan town 750 miles away.

Police fired tear gas to disperse hundreds of Buddhist monks and other Tibetans after they marched from the historic Labrang monastery and smashed windows in the county police headquarters in Xiahe, witnesses said.

Also Saturday, fresh demonstrations by Tibetan exiles and their supporters sprouted up in New York, neighboring Nepal, Switzerland and Australia.

The Chinese government is hoping a successful Olympics will boost its popularity at home as well as its image abroad. But Beijing’s hosting of the Olympics has already attracted scrutiny of China’s human rights record and its pollution problems.

So far, international criticism of the crackdown in Tibet has been mild. The U.S. and European Union called for Chinese restraint without any threats of an Olympic boycott or other sanctions.

Bernanke and the four Fed governors voted yesterday to become creditors to Bear Stearns Cos., a securities firm that isn’t a bank, by invoking a law that hasn’t been used since the 1960s. Three days earlier, the Fed said it would swap Treasury notes on its balance sheet for privately issued mortgage-backed securities held by Wall Street firms.

“It’s a re-drawing of the relationship of the Federal Reserve with the rest of the financial system,” said Vincent Reinhart, former director of the Division of Monetary Affairs at the Board. Risks of so-called moral hazard, where firms will now come to count on bailouts by a federal agency, “are considerable,” he said.

The cost of doing nothing may have been even greater, say other former Fed officials. Bernanke is attempting to keep the nation’s financial machinery working as record home foreclosures make investors reluctant to hold even bonds backed by Fannie Mae and Freddie Mac, government-chartered firms. The 54-year-old Fed chairman is also trying to contend with a worsening economic slump: Reports this week showed that retail sales unexpectedly fell and consumer confidence slid to a 16-year low.

Meyer’s Experience

“As a governor, you never want to be placed in this position,” said former Fed governor Laurence Meyer, who served during the central bank’s coordination of the rescue of hedge fund Long-Term Capital Management LLC in 1998. “Everybody has to be uncomfortable with this. But it is always, compared to what? Just imagine what would have happened today if this action hadn’t been taken.”

Even with the bailout, stocks retreated. The Standard & Poor’s 500 Index fell 2.1 percent yesterday to 1,288.14. The S&P Financials Index lost 4.1 percent. Bear Stearns tumbled $27, or 47 percent, to $30. Lehman Brothers Holdings Inc., Citigroup Inc. and Bank of America Corp. also declined.

Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per euro.

“The curious outcome of breaching this latest milestone is that the size of the euro zone’s annual output has now exceeded that of the U.S.,” the economics department of Goldman Sachs, the Wall Street investment bank, said in a note to clients.

In its annual report on more than 190 countries, the State Department did say Tuesday that China’s “overall human rights record remained poor” in 2007. China, the report said, tightened media and Internet curbs and increased controls on religious freedom in Tibet and the western Xinjiang region. The report said that China’s abuses also included “extrajudicial killings, torture and coerced confessions of prisoners, and the use of forced labor.”

But the report dropped China from a list of 10 countries that it deemed the worst offenders: North Korea, Myanmar, Iran, Syria, Zimbabwe, Cuba, Belarus, Uzbekistan, Eritrea and Sudan.

At a news conference, Jonathan Farrar, acting assistant secretary of state for democracy, human rights and labor, did not answer questions about why China was dropped from the list of worst abusers.

“I think the report highlights that generally the human rights record remains poor,” he said.

When asked repeatedly why China was dropped from the list, and whether that had anything to do with the Beijing Olympics this summer, Farrar said: “I would say China is listed under a section dealing with authoritarian countries undergoing economic reform where the democratic political reform has not kept pace. And that is a completely accurate assessment.”

The press freedom group Reporters Without Borders denounced the move. “This decision was announced even as it was learned that some 100 Tibetan monks have been arrested and Chinese authorities are refusing to release activist Hu Jia and dozens of other freedom of expression advocates,” the organization said in a statement. “U.S. authorities are depriving themselves of yet another effective way to pressure China, without having achieved any good-will gesture from Beijing.”

Other critics said that the United States should look closer to home when gauging human rights abuses.

Amnesty International USA complained that the Bush administration was giving lip service to human rights around the world while ignoring abuses by allies of the United States.

In a videoconference, Bush heard from U.S. military and civilian personnel about the challenges ranging from fighting local government and police corruption to persuading farmers to abandon a lucrative poppy drug trade for other crops.

Bush heard tales of all-night tea drinking sessions to coax local residents into cooperating, and of tribesmen crossing mountains to attend government meetings seen as building blocks for the country’s democracy-in-the-making.

“I must say, I’m a little envious,” Bush said. “If I were slightly younger and not employed here, I think it would be a fantastic experience to be on the front lines of helping this young democracy succeed.”

Peaceful street marches by Tibetan Buddhist monks over past days gave way to the biggest demonstrations the remote, Himalayan region has seen in nearly two decades, with anti-riot police patrolling the streets just months before the Beijing Olympics.

“Now it’s very chaotic outside,” an ethnic Tibetan resident said by telephone. “People have been burning cars and motorbikes and buses. There is smoke everywhere and they have been throwing rocks and breaking windows. We’re scared.”

Japan’s Kyodo news agency said rioters had taken control of central Lhasa, quoting a British journalist there. Radio Free Asia said Chinese police fired on rioting Tibetan protesters, killing at least two.

Residents around the Jokhang temple in old Lhasa that was a scene of protests said they were hiding indoors. Some said they had seen lines of anti-riot police, but none spoke of gunfire. “We are waiting to see what will happen tomorrow,” said an ethnic Tibetan woman. “It could get much worse, so we are scared.”

Up to 400 protesters, including students, had gathered around a market near the Jokhang temple early on Friday and were confronted by about 1,000 police, according to a witness cited by Matt Whitticase of the Free Tibet Campaign in London.

Four police were injured, and another protest break out near the Potala Palace, Whitticase added.