The dollar fell against most major currencies on Friday as investors' risk appetite was boosted by government aid to Bank of America and European Central Bank (ECB) chief ruled out zero rates.

The US government entered into an agreement on Friday with Bank of America to provide a package of guarantees, liquidity access and capital as part of its commitment to support financial market stability.

The US Treasury Department and the Federal Deposit Insurance Corporation (FDIC) will provide Bank of America with protection on an asset pool of approximately US$118 billion of loans, securities backed by residential and commercial real estate loans.

In addition, the Treasury Department will invest US$20 billion in the bank from the Troubled Assets Relief Program (TARP) in exchange for preferred stock with an 8 percent dividend.

The objective of this program is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings, and retirement security, the Treasury Department and FDIC said in a statement.

The ECB cut rate by 50 basis points on Thursday, leaving its benchmark rate at 2 percent, a historically low. ECB president Jean-Claude Trichet said the euro zone would not follow US and Japan in cutting rates to zero, it was reported on Friday.

Trichet hinted on Thursday that the bank may pause in cutting interest rates in February but reduce them again in March. Some analysts have expected the euro zone and UK would go to zero rate as European economies kept deteriorating.

The euro bought US$1.3300 in late New York trading compared with US$1.3163 it bought late Thursday. The pound rose to US$1.4746 from US$1.4659.

The dollar fell to 1.2486 Canadian dollars from 1.2508 Canadian dollars, and fell to 1.1160 Swiss francs from 1.1220 Swiss francs. It rose to 90.58 Japanese yen from 89.68 Japanese yen.

(Xinhua News Agency January 17, 2009)