LONDON, Feb 17: The dollar forged higher against the euro on Monday after UN arms experts won more time for inspections in Iraq and millions of anti-war protesters took to the streets worldwide over the weekend.
The single European currency fell to $1.0704 from 1.0789 late on Friday in New York.
But the US currency did not make progress against the Japanese unit, trading at 120.32 yen from 120.31 on Friday.
The price of gold fell over seven dollars an ounce to 346.70 dollars.
US markets were closed for a public holiday.
The dollar fought back against the euro-zone unit in the wake of a crucial report by chief UN arms inspectors Hans Blix and Mohamed ElBaradei on Friday which dealt a setback to US plans to wage war in Iraq.
The dollar has gained ground across the board as the market is interpreting the boost for the anti-war faction on the UN Security Council given by Blix’s relatively positive assessment of progress in Iraqi disarmament as at least delaying the prospect for war, said UBS Warburg analyst Shahab Jalinoos.
Massive global anti-war protests over the weekend further heightened the sense that the US will find it hard to push forward with unilateral action, he added.
Dealers were keeping a wary eye on an emergency summit European Union leaders in Brussels focusing on Iraq, which was to begin less than 24 hours after NATO reached a last-ditch compromise to settle one of the most damaging disputes in its history.
ABN Amro analysts said the summit was likely to be “a fraught affair” and was likely to put political tensions within the EU “under the spotlight”.
But analysts noted that although the dollar had risen against the euro, it had not gained ground against the yen.
The completion of dollar short position unwinding is clearly undermining the dollar-yen rate, said Bank of Tokyo Mitsubish analyst Derek Halpenny.
A dollar short position is when dealers sell borrowed dollars, betting on a fall in the value of the US currency.
The decline in euro-dollar is undermining the euro against the yen rather than lifting the dollar against the yen, said Halpenny.
The euro has been a popular currency for Japanese investors who have reduced their appetite for dollars due to the lack of yield, he added.
The euro was changing hands at 1.0704 dollars from 1.0789 late on Friday in New York, 128.81 yen (129.79), 0.6687 pounds (0.6678) and 1.4727 Swiss francs (1.4689).
The dollar was being quoted at 120.32 yen (120.31) and 1.3757 Swiss francs (1.3614).
The pound was at $1.6010 (1.6147), 192.61 yen (194.26) and 2.2024 Swiss francs (2.1983).
On the London Bullion Market, the price of an ounce of gold rose slumped to $346.70 from 354.25 late on Friday. —AFP