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The dollar sank to another record low against the Japanese yen and dropped nearly 3 percent vs. the German mark Friday after the central banks in the United States and Japan failed to aid the sagging U.S. currency.

The dollar first plunged in overnight trading overseas when the Bank of Japan didn't cut key lending rates, as it had been widely expected to do. The dollar took another hit in early U.S. trading when the Federal Reserve denied rumors it had called an emergency meeting to help support the U.S. currency.Lower Japanese rates would have helped the dollar by making yen-denominated investments less alluring. Higher U.S. rates would make dollar-denominated holdings more attractive.

"There was no coordinated move to help the dollar," said Amy Smith, a senior currency analyst at IDEA, a financial markets advisory firm in New York. "That just set off its slide."

In late New York trading, the dollar was quoted at 88.55 yen, down from 89.58 late Thursday, but up from its new intraday record low of 86.23 yen.

The dollar also was changing hands in New York at 1.3735 marks, down from 1.4090.

The dollar first started to fall during overnight trading when the Bank of Japan announced it was not going to cut interest rates. There had been speculation in Japanese media that it would lower its discount rate, a key lending rate to banks.

"The market was anticipating the rate cut and it didn't happen," said Christopher Iggo, an international economist with Chase Manhattan Bank in New York. "The market had a hard time digesting that."

The dollar continued its fall in Europe and then dropped to a record low in early U.S. trading.

A rumor that the Fed would hold an emergency meeting helped to temporarily support the U.S. currency, but once that was denied, the dollar just tumbled.

"It looks like the Fed doesn't care about the dollar because it won't intervene," said Smith. "Obviously, this hurts the dollar."

The dollar's decline came on the heels of Thursday's decision by the Germany central bank to lower its discount rate by a half percentage point to 4 percent. That helped the dollar in Thursday's trading, but the dollar reversed course after the Japanese rate statement.

"The Bundesbank just made that move and the benefits of it have completely evaporated," said Christopher Low, a senior economist at HSBC Markets, a unit of Hongkong and Shanghai Banking Corp., in New York.

There was a widespread expectation that the dollar's decline will continue.

Low said issues like the trade deficit and the lack of progress in U.S.-Japan auto talks continue to "push the dollar down."

"The current government - Republicans and Democrats - are unwilling to face the long term deficit problem," he said. "The market wants action and that could help the dollar."

The British pound was quoted at $1.6210, up from $1.6035.