TOKYO - The dollar edged lower by late Thursday afternoon in Asia in a market growing nervous about the possibility of U.S. military action against Iraq. Dollar sentiment remains bearish despite a 1.4 percent rise in the Dow Jones industrial average on Wednesday after five consecutive losing sessions, dealers said. There has been growing speculation about the use of force by the United States against Iraq. But the White House reiterated that President Bush had made no decision on whether to use military force to overthrow Iraqi President Saddam Hussein, accused by Washington of developing chemical, biological and nuclear weapons.
Bush said on Wednesday he would ask Congress to back possible military action against Iraq and would outline the "serious threat" posed by Iraq's arms program in a speech on September 12 at the United Nations.
Junya Tanase, global markets Officer at Chase Manhattan Bank, said: "The market jitters about possible U.S. military action against Iraq are making traders wary of holding long (dollar) positions over an extended period of time." This made recent upticks in the dollar short-lived.As of 1:45 a.m. EDT, the dollar was quoted at 117.75/80 yen down from its late Wednesday New York levels of 117.97/05.The euro was firmer at 99.42/45 cents compared to 99.15/20 in late U.S. trade. It was steady against the yen at 117.04/13 yen Helped by speculative bids, the euro rose to a high of 117.21 yen earlier on Thursday.
Many currency traders say military action would put downward pressure on the greenback as it would cause a further rise in oil prices, which in turn would deal a blow to a fragile U.S. economic recovery."Of course, other economies in Europe and Japan would also be damaged by an oil price rise," said a senior trader at a Japanese bank."But the U.S. economy is likely be damaged most significantly because the U.S. could be hurt not just by higher oil prices but by a further contraction of global capital inflows into the U.S. markets," he added. Global capital flows are most likely to shrink further in times of war, traders said.//www.money.iwon.com