LONDON, Sept 9: The dollar came under pressure on Tuesday as concerns about the impact on the US budget deficit of occupying Iraq took some of the shine off prospects for a US economic recovery, analysts say.

The single European currency rose to $1.1105 from 1.1063 late on Monday in New York.

The dollar eased to 116.33 yen from 116.81 on Monday.

With little economic news, US President George W. Bush’s recent request to Congress for $87 billion for policing and rebuilding Iraq and Afghanistan over the next year was spreading some jitters, analysts said.

Concerns over both geo-political risk and the evolution of the US current account deficit have re-emerged in the light of President Bush’s emergency funding request, said Steve Pearson, strategist at the British bank HBOS.

In the near term, however, the dollar might regain some ground as dealers take guidance from economic data and the performance of equities, market watchers said.

Analysts expect US data, on the whole, to surprise on the upside more often than data in the euro zone.

Until the euro zone delivers positive surprises the euro is likely to continue to be vulnerable to further falls, said Mitul Kotecha, currency strategist at Credit Agricole Indosuez.

Over the short-term the euro may struggle to make further gains and a failure to break above resistance at $1.1132 will point to a fall to 1.0994, he added.

The yen meanwhile was firm following another solid performance by Japanese stocks and renewed optimism about the economy.

Optimism about the Japanese economic outlook is increasingly evident, said Ian Harwood, economist at Dresdner Kleinwort Wasserstein.

It’s easy to see why. Recent real economy data has been robust and, importantly, stronger than expected while lead indicators of activity are increasingly upbeat, he added.

The euro was changing hands at $1.1105 from 1.1063 late on Monday in New York, 129.21 yen (128.28), 0.7022 pounds (0.6988) and 1.5440 Swiss francs (1.5393).

The dollar was being quoted at 116.33 yen (116.81) and 1.3901 Swiss francs (1.3908).

The pound was at $1.5821 (1.5824), 184.01 yen (184.84) and 2.1991 Swiss francs (2.2008).

On the London Bullion Market, the price of an ounce of gold rose to $378.05 from 374.65 on Monday afternoon. —AFP