April 1, 2003	Tuesday	Muharram 28, 1424

LONDON, March 31: The dollar tumbled on Monday as dealers shuddered at a warning from the United States of worse to come for US-led forces fighting in Iraq.

Dealers also took fright at a boast by authorities in Baghdad that thousands of Arab volunteers were primed for suicide missions against coalition forces, after a suicide bomber killed four US soldiers over the weekend.

The single European currency rallied to a two-week high of 1.0898 dollars from 1.0783 late on Friday in New York.

The dollar fell to 118.90 yen from 119.75 on Friday.

The dollar has been undermined against the euro and the yen by the belief that war in Iraq will be prolonged and complicated, said Derek Halpenny, economist at Bank of Tokyo-Mitsubishi.

The suicide attack that killed four US soldiers with a promise of more to come and the news that an attack (by ground forces) on Baghdad may not take place for weeks has fuelled this belief, he added.

With no sign of the start of the ground campaign to conquer the Iraqi capital, US Secretary of Defense Donald Rumsfeld warned Sunday that “the most dangerous and difficult days are still ahead of us, in stark contrast to the upbeat US comments heard at the start of the war.

After investors’ hopes of a swift end to the war were dashed, expectations of a post-war rebound by the US stock market and the dollar were also waning.

As “battle fatigue” set into dealing rooms, investors were switching some of their focus back to the concerns that had sent the US currency tumbling even before the start of hostilities, analysts said.

As understandable as it is, war watching 24 hours a day gets very dull, said Bank of America analyst Callum Henderson.

The longer the war drags on the more people focus not on the war but on the previous cyclical factors that were impacting on the dollar before the war started.

Such factors included the low rates of return from US stocks and bonds and the United States’ inability to fund its current account deficit, he said.

The dollar gained a modicum of support however through buying of the currency from exporters in Japan at the end of the country’s financial year, which pushed the dollar up to an intra-day high of 120.20 yen briefly in Asian trading.

There was modest demand for the dollar among Japanese companies as they closed their annual earnings reports for the end of the financial year, said Mitsuru Sahara, vice president of foreign exchange division at UFJ Holdings in Tokyo.

We see such demand every March and buying was purely technical, Sahara said.

The euro was changing hands at 1.0898 dollars from 1.0783 late on Friday in New York, 129.19 yen (129.13), 0.6893 pounds (0.6848) and 1.4759 Swiss francs, unchanged from late on Friday.

The dollar was being quoted at 118.90 yen (119.75) and 1.3581 Swiss francs (1.3685).

The pound was at $1.5768 (1.5736), 187.45 yen (188.44) and 2.1414 Swiss francs (2.1535).

On the London Bullion Market, the price of an ounce of gold rose to $335.20 from 330.75 on Friday afternoon. —AFP