LONDON - Dollar gave up some of its gains against the euro and yen on Thursday as the market shifted focus from relief over a peaceful September 11 anniversary to worries over the U.S. economy and the threat of war with Iraq. The market was eagerly awaiting Federal Reserve Chairman Alan Greenspan's testimony before Congress at 1400 GMT for further hints about the state of the U.S. economy and President Bush's address to the United Nations later in the day. Also, the European Central Bank's Governing Council holds its first rate-setting meeting after its summer break on Thursday and is widely expected to keep the benchmark rate at 3.25 percent where it has been frozen since last November.
"We've got 9/11 out of the way and the focus is going to be back on the economic fundamentals, and obviously the on-going tensions between the U.S. and Iraq," said Kamal Sharma, currency strategist with Commerzbank. "Then tomorrow's (U.S. retail sales) data can be quite significant as well." By 3:54 a.m. EDT, the dollar was off a touch at $0.9773 to the euro, retreating from Wednesday's two-week high of $0.9694. The greenback fell over a third of a percent to 119.91 yen, pulling back from Wednesday's one-month high of 120.70. Talk of sporadic selling by exporters and profit-taking weighed on the dollar in Asia. In Europe, traders mentioned Iraq tensions and re-evaluation of positions after September 11. Dollar sentiment has see-sawed in the past week, but traders say with September 11 now over, the market can go back to economic fundamentals. "There was a fairly aggressive move down this morning," said one European trader. "I think more than anything else it's a sense of having yesterday out of the way, and all that position squaring is over and now they're re-instating some things."//www.money.iwon.com