/www.fxserver.com/ TOKYO, Feb 13 - The dollar slipped in Asia on Thursday, succumbing to uncertainties over Iraq and talk of seasonal yen demand from Japanese investors. By midday in Tokyo, the dollar traded at 120.89/94 yen from 121.38 in late New York trade on Wednesday. Japanese exporters were said to be behind the selling, along with Japanese investors rumoured to be converting income gains made from U.S. Treasuries into yen. Such flows come around every year before fiscal book-closings in March. The euro was firmer at $1.0748/53 from $1.0709. It was little changed at 129.93/130.05 yen from 130.02. Analysts said the dollar was in the process of correcting a months-long drubbing triggered by uncertainty over a possible U.S.-led war in Iraq. "The market has yet to see the worst-case scenario for the dollar and so short positions are being covered," said Daisuke Uno, chief market analyst at Sumitomo Mitsui Banking Corp. "But we're not sure if this really is the beginning of a longer-term recovery." Traders were scaling back the possibility of a drawn-out war that would destabilise the U.S. economy, but uncertainties remained. "It's true the market is a bit tired of trading on Iraq factors, but we can't ignore them. That's why the dollar has been choppy and moving in a narrow band recently," said Shogo Nagaya, forex manager at Nomura Trust and Banking. IRAQ, NORTH KOREA With the United States still in disagreement with historical allies on whether to attack Iraq, traders said flows were limited to position adjustments for now. Federal Reserve Chairman Alan Greenspan sharpened his warning about the danger of ballooning deficits on Wednesday, but the comments had limited impact on currencies since he had made similar remarks on Tuesday. U.S. retail sales data are due later in the day, but the figure is likely to be a temporary distraction in a range-bound market. The January figure is seen dropping 0.6 percent, but rising 0.5 percent if auto sales are excluded. "The Iraq factor will continue to be a main driving force in the market, but traders are trying to find other factors, like the outcome of the Bank of Japan policy board meeting and jitters over North Korea," Nomura's Nagaya said. The BOJ began a two-day policy-setting meeting on Thursday, but the market expects no change in policy. On North Korea, Sumitomo Mitsui's Uno said the brewing nuclear crisis was a yen-negative factor, with the economic risks for Asia highlighted in a credit ratings downgrade for South Korea on Tuesday. On Wednesday, the governing board of the International Atomic Energy Agency declared North Korea in breach of atomic safeguards, sending the crisis to the 15-nation U.N. Security Council, which has the power to impose economic sanctions.