LONDON, Feb 10: The dollar held steady against other leading currencies here on Monday as the market eyed developments over Iraq amid signs the rift between the United States and other key UN members may be widening.
The single European currency fell to $1.0808 from 1.0815 late on Friday in New York.
The dollar also crept higher to 120.48 yen from 120.23 on Friday.
Analysts said the dollar had reacted calmly to growing opposition to war among veto-wielding UN Security Council members Russia and France.
But they warned the US unit could be set for further falls in the run-up to a key report by chief UN weapons inspectors Hans Blix and Mohamed ElBaradei, who are scheduled to address the Security Council on Friday.
Uncertainty remains the order of the day ahead of Friday’s UN meeting and this cannot be too good for the dollar, said Canadian Imperial Bank of Commerce analyst Audrey Childe-Freeman.
That view was echoed by analysts at German bank WestLB who said the dollar’s failure to post any meaningful gains in the wake of Friday’s robust US labour market data had shown that the time is not yet ripe to expect any meaningful improvement in dollar sentiment.
They added that the US unit was vulnerable to signs that the gulf between the US and key UN Security Council members had “widened significantly” in recent days.
Germany on Monday joined France and Belgium in formally objecting to a package of NATO military support measures in case of a war against Iraq.
The move followed reports that UN Security Council members Germany and France will deliver a series of proposals to disarm Iraq by peaceful means to the United Nations on Friday.
But while that plan was welcomed by Moscow it drew an angry response from Washington with US President George W. Bush warning Sunday that the United Nations faced a “moment of truth” with respect to Iraq.
Analysts said the rift had helped the euro weather the impact of grim euro-zone economic data.
The German economy and labour ministry said industrial output fell by 2.6 per cent in December from November.
It was a shocking number but the markets have completely bypassed it, said Commerzbank strategist Kamal Sharma.
I think there’s so much bad news about the German economy already out there that I don’t think it came as any greatsurprise to the market,” he added.
Sharma said the figures would nonetheless help cement expectations that the European Central Bank would be forced into lowering lending rates.
We think they’re going to cut next month and the market seems to be gradually coming round to this view, Sharma said.
The euro was changing hands at 1.0808 dollars from 1.0815 late on Friday in New York, 130.15 yen (130.07), 0.6620 pounds (0.6625) and 1.4667 Swiss francs (1.4654).
The dollar was being quoted at 120.48 yen (120.23) and 1.3575 Swiss francs (1.3553).
The pound was at 1.6319 dollars (1.6315), 196.61 yen (195.95) and 2.2151 Swiss francs (2.2112).
On the London Bullion Market, the price of an ounce of gold fell to $371.30 from 375.80 late on Friday. —AFP