The dollar was higher midmorning on orders from banks in the Middle East, as well as East Asia, after news Iraq has sent a letter to the UN agreeing to a return of weapons inspectors, dealers said. However, they added that gains were limited by Japanese-exporter selling at any price after the three-day holiday here, while investors are also wary of the negative response to Baghdad's offer from the US administration. "This is a tactical step by Iraq in hopes of avoiding strong UN Security Council action. As such, it is a tactic that will fail," said White House spokesman Scott McClellan. "It is time for the Security Council to act."
"Middle East banks are buying dollar/yen in a good amount and a large continental bank in Singapore is a big buyer," said Mitsuru Sahara, a dealer at UFJ Bank, adding that investors cannot know for sure if this is Iraq-related. "Many major banks in Asia were called at the same time. Iraq is US-dollar buying news but the US is pretty sceptical," he added. "Exporters are selling at any level - at 122.00-122.40 yen - and the euro/yen, too, because it's at the highest level of the recent range," he said.
"It's the biggest news and many people expected that military action would be bad for the dollar," said Minori Takeuchi, forex analyst at the Tokyo branch of JP Morgan. "Iraq's letter means there should be less chance for military action but the US is sceptical so I'm not sure we should be pushing the dollar higher," she said, noting that "especially after the three-day weekend, (exporters) are selling." Takeuchi added that the dollar was "well supported" regardless of the fears of a US attack on Iraq, "so we don't see much of a reversal" if military action is put on the backburner.
The yen was also hit by further comments by Deputy Finance Minister for International Affairs Haruhiko Kuroda this morning after he suggested the possibility of intervention to weaken the yen on Friday. Meanwhile, the Bank of Japan is not expected to alter its monetary policy at its two-day policy meeting starting today, with only the possibility of a fairly meaningless expansion of government-bond buying, Takeuchi said. Apart from the Iraq news, the euro also remained weak on concerns over upcoming elections in Germany, and with the Swedish elections last weekend, which returned a larger majority for left-wing parties.//www.ananova.com