Dollar fights back as war concerns ease

THE euro and sterling sank against the dollar yesterday as concerns about an imminent US-led war on Iraq eased, bolstering the greenback across the board in relatively thin trade.

Analysts say repeated terror scares in London have weighed on the pound, which shed 1% against the dollar to hit a low of $1.5973.

The dollar, which hit a four-year low around 1.34 Swiss francs earlier this month, jumped to a one-month high near 1.38. The greenback also pushed beyond $1.07 per euro, triggering automatic buy orders on the break of key technical levels.

“Sterling has been underperforming for some time and it continues to do so because of a negative reaction to the UK’s role in the Gulf and the heightened sense of security,” said Neil Parker, market strategist at Royal Bank of Scotland Financial Markets.

Against the euro it also lost a third of a percent to 67.01 pence, bringing its losses this month to nearly 3%. Traders said volumes were thin due to the closure of US markets for President’s Day.

The dollar rallied as weekend global anti-war demonstrations and a dovish report from UN arms inspectors on Friday appeared to slow momentum towards war. News that NATO has broken its deadlock over planning for the defence of Turkey in the event of war also eased tensions.

However, British Foreign Secretary Jack Straw said he was pessimistic about the prospects of Iraqi compliance with UN disarmament resolution and time was running out for Baghdad to avoid war.

Some analysts also said worries the British economy might be slowing down faster than its European counterparts also proved to be a drag on the pound.

“It seems people still want to be long on the euro against sterling,” a European bank dealer said.