Dollar set to make steady post-war gains

IT had been expected that the ending of the war in Iraq would bring some relief to the dollar.

In recent days, however, the US currency has traded towards the top end of a $1.05-$1.10 range against the euro. The war premium on the dollar, therefore, remains high. The upper end of this trading range is likely to hold in the near term.

Looking ahead, the dollar should benefit from the expected bounce in business and consumer confidence, as well as improved sentiment towards US equities. With the war in Iraq won and the apparent lessening of other geopolitical tensions, the dollar should benefit against other major currencies.