LONDON, Feb 25: The dollar was under pressure on Tuesday, weighed down by United Nations discord over Iraq and heavy falls on Wall Street as the euro received a boost from news of an unexpected jump in German business confidence.
The single European currency was being traded at 1.0801 dollars from 1.0793 late on Monday in New York.
The dollar fell to 117.30 yen from 117.84 late on Monday
It’s back to square one on the geopolitical front... uncertainty remains the order of the day at the moment, so it the same old stock market/dollar weakness story, said Canadian Imperial Bank of Commerce analyst Audrey Childe-Freeman.
The United States and Britain were to press their UN Security Council colleagues Tuesday to authorise the use of force to disarm Iraq, despite strong opposition from several members.
They were expected to lobby undeclared members of the 15-member council to quash a challenge by France, Russia and Germany, which have openly opposed the draft US-British resolution presented late Monday.
WestLB analysts advised clients to buy the euro on any signs of weakness given the deepening split between the US/UK and other European countries and the risk that UN members would fail to resolve their differences.
But ABN Amro analyst Rob Hayward believes Iraqi President Saddam Hussein’s refusal to comply with a UN demand that he destroy his banned Al-Samoud 2 missiles may help Washington and London as they attempt to drum up support.
And the euro was said to have received a further modest lift from news of an unexpected improvement in German business confidence.
West Germany’s Ifo research institute said its headline business climate index rose to 88.9 in February from 87.4 the previous month, which compared with economists’ expectations for an unchanged reading.
Ifo president Hans-Werner Sinn said he saw increasing signs of an improvement in the German economy’s fortunes.
However, Childe-Freeman, while admitting the report was stronger than expected, urged caution, arguing it would be wrong to get “carried away” with one month’s set of figures.
The dollar hit a near-six month low against the yen after Japanese Finance Minister Masajuro Shiokawa revealed the Group of Seven (G7) has agreed to leave currency rates to the market, dealers said.
But Shiokawa’s apparent conversion to a laissez-faire approach contrasted with his subsequent remarks warning the Ministry of Finance would intervene in the market to prevent speculative moves, helping the dollar regain some ground.
The euro was changing hands at $1.0801 from 1.0793 late on Monday in New York, 126.70 yen (127.18), 0.6812 pounds (0.6797) and 1.4648 Swiss francs (1.4623).
The dollar was being quoted at 117.30 yen (117.84) and 1.3559 Swiss francs (1.3549).
The pound was at $1.5862 (1.5875), 186.06 yen (187.07) and 2.1509 Swiss francs (2.1509).
On the London Bullion Market, the price of an ounce of gold jumped to $358.80 from $352.30 late on Monday. —AFP