LONDON, Dec 30: The dollar slid to six-week lows versus the yen and held near three-year lows against the euro on Monday, weighed by persisting worries over a possible US-led attack on Iraq and North Korea’s nuclear plans.

The US unit dropped over half a yen to a low of 119.20 in European trading, after a listless Asian session, as thin market liquidity led to exaggerated moves.It stood half a per cent down on the day at 119.24.

Geo-political worries, centred on Iraq and North Korea, continued to provide a negative backdrop for the greenback, though analysts said an ongoing threat of Bank of Japan intervention to weaken the yen offered some support.

There was a liquidation of long dollar positions once it became clear that there was not going to be any BOJ intervention during Tokyo trade, said Nick Parsons, senior currency strategist at Commerzbank.

However, he added: The Bank of Japan has shown a preference for intervention on quiet days and holidays so you couldn’t rule it out for the rest of the week.

The dollar has suffered for weeks from investor nerves over Iraq, but North Korea has added to the pressure following Friday’s news that it had expelled United Nations weapons inspectors and made plans to re-start its nuclear programme.

The dollar is basically trading on North Korea at the moment and Powell’s comments at the weekend should lend it some support in US trade, said Julian Jessop, chief European economist at Standard Chartered.

The long-term trend is still for the dollar to weaken, but there is a risk we may see a squeeze higher in the short-term, he added.

In times of global uncertainty the flow of funds around the world tends to dry up, making it more difficult for the United States to fund its current account deficit.

In turn, this benefits countries like Switzerland and Japan that have large current account surpluses.

However, the dollar managed to firm up against the Swiss franc on Monday, holding around half a centime above Friday’s four-year low of 1.3895 Swiss francs.

The closely-watched Chicago purchasing managers’ index for December is the only release of note in the United States on Monday, with analysts expecting it to have weakened to 53.0 from 54.3 in November.—Reuters