LONDON, Feb 11: The dollar pushed up against other leading currencies on Tuesday as the market continued to mull the prospects for a war in Iraq after diplomatic efforts to buy more time for UN weapons inspectors were stepped up.

The single European currency fell to 1.0675 dollars from 1.0735 late on Monday in New York.

The dollar also crept higher to 121.58 yen from 121.21 on Monday.

“A lot of bad news, in terms of the Iraq story, has been priced into the dollar which now appears to be going into a corrective phase,” said ABN Amro currency strategist Aziz McMahon.

But analysts warned that the dollar would remain vulnerable to the risk of war, particularly if the United States were to launch an attack on Iraq without broad-based support.

That, they warned, could mean foreign nations would be less likely to fund any conflict than they were in the last Gulf war.

“The recent dollar rise is more the result of short-covering in a bear market than the beginning of a new and more favourable trend for the greenback,” said Canadian Imperial Bank of Commerce analyst Audrey Childe-Freeman.

Hopes that the United States would be able to forge a broad international alliance were dented on Monday when Washington responded angrily to a joint initiative by several UN Security Council members to delay a war.

But despite the widening rift, analysts said the market remains convinced that a war was virtually inevitable.

“I don’t think at this stage anyone is taking seriously the idea that war is not going to happen,” McMahon said.

The euro was changing hands at 1.0675 dollars from 1.0735 late on Monday in New York, 129.81 yen (130.15), 0.6598 pounds (0.6599) and 1.4673 Swiss francs (1.4657).

The dollar was being quoted at 121.58 yen (121.21) and 1.3744 Swiss francs (1.3651).

The pound was at 1.6183 dollars (1.6289), 196.76 yen (197.05) and 2.2245 Swiss francs (2.2121).—AFP