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.

A U.S. dollar bill is displayed in Toronto in this posed photo, March 26, 2008. REUTERS/Mark Blinch

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.

An international financial source with knowledge of the discussions told Reuters that foreign exchange authorities from the three were in close contact at the time and discussed joint intervention if the dollar’s fall intensified.

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.

But market players detected a shift in U.S. officials’ stance towards the dollar in June when Federal Reserve Chairman Ben Bernanke issued a rare warning on the inflation risk posed by a weak dollar, and Treasury Secretary Henry Paulson declined to rule out intervening in currency markets.

Under the intervention framework, Japan was to supply yen through currency swaps. The plan also called for using a previously established swap mechanism between the United States and Europe.

No coordinated intervention took place, however, as the dollar began recovering shortly after U.S. authorities brokered JP Morgan Chase’s buyout of Bear Stearns -- the biggest victim so far in the year-old credit crisis.

As measured by the dollar index, the currency plunged to that record low on March 17, the first market day following the announcement of the Bear Stearns deal, but later recovered. The dollar tumbled to a 13-year low of 95.77 yen that day but is now near 109 yen.

A U.S. Treasury spokeswoman, the Federal Reserve and the ECB declined to comment on the report. Japan’s top financial diplomat, Naoyuki Shinohara, also said he had no comment.

Japanese Finance Minister Bunmei Ibuki told Reuters the nation’s monetary authorities will decide how to deal with any sharp foreign exchange moves in the future based on economic fundamentals at the time.

“If anything, the fact that officials recognized the concern about the dollar’s decline seems somewhat supportive for the dollar as maybe benign neglect was not so neglectful,” said Marc Chandler, head of global FX strategy at Brown Brothers Harriman in New York.

“At the end of the day, however, President Bush is still set to be the first American president since at least the break-up of Bretton Woods that has not authorized intervention in the FX market, and given the recent price action the distinction looks relatively safe.”