April 8, 2003	Tuesday	Safar 5, 1424

LONDON, April 7: The dollar powered upwards Monday on news of rapid progress by US-led forces who rolled into Baghdad and Basra in southern Iraq over the weekend, raising expectations of a strong rally on Wall Street.

The single European currency slumped to $1.0569 the lowest level since March 21, the second day of the war from $1.0729 late on Friday in New York.

The dollar rose to 120.80 yen from 119.95 on Friday.

Gold prices fell six dollars per ounce, while bond and oil prices also dropped sharply.

The dollar has rallied across the board on the weekend war news, as US forces have pushed into Baghdad and UK forces into Basra, said ABN Amro analyst Rob Hayward.

The US unit surged in tandem with stock markets in Europe and Asia, and amid hopes US stocks would follow suit when trading resumed, after US forces pierced into the heart of Baghdad on Monday after an initial foray on Saturday.

All this is good news for the ‘quick war’ hopes and translate into a strong open for the stock market, with the dollar also firming substantially, said Audrey Childe-Freeman, economist at the Canadian Imperial Bank of Commerce.

Analysts said that the US dollar rally had further to go, though many see other hurdles on the horizon, notable renewed concerns about the strength of the US economy and the bulging US trade and budget deficits.

But a relatively short war should limit the economic fallout from the war, they added.

The military success of Allied forces and the absence of any terrorist attack suggests the business and consumer climate to rebound over the next couple of months, said BNP Paribas strategist Hans Redeker.

Equity markets are likely to rally by another 10-15 percent, allowing the US dollar to move with it, he predicted.

Events in Iraq overshadowed news that the European Commission has cut its euro-zone growth forecast for 2003 to 1.0 per cent from 1.8 per cent, according to a draft version of its spring economic forecasts to be released Tuesday.

For 2004, the forecast is reduced to 2.2 per cent from 2.6 per cent, according to the draft obtained by AFX News, AFP’s financial news subsidiary.

Germany, the 12-nation zone’s biggest economy, is expected to grow by just 0.4 per cent in 2003 against the commission’s autumn forecast of 1.4 per cent. For next year, the German figures are 2.0 per cent from 2.3 per cent before.

The euro was changing hands at $1.0569 from 1.0729 late on Friday in New York, 127.67 yen (128.68), 0.6825 pounds (0.6873) and 1.4868 Swiss francs (1.4860).

The dollar was being quoted at 120.80 yen (119.95) and 1.4069 Swiss francs (1.3847).

The pound was at $1.5491 (1.5606), 187.10 yen (187.19) and 2.1803 Swiss francs (2.1610).

London Bullion Market, the spot price of an ounce of gold fell $6.00 from the previous closing price to $319.55 per ounce. —AFP