London, Feb. 6 (Bloomberg) -- The dollar fell against the euro and the yen as some members of the United Nations Security Council called for weapons inspections in Iraq to continue before a decision about whether to attack is made. France, Russia and China led Security Council members in calling for the UN to continue inspections, resisting U.S. Secretary of State Colin Powell's evidence that Iraq is refusing to disarm. A lack of full UN support for an attack is bad for the dollar because the U.S. would bear more of the cost of a war, and be more exposed to any terrorist reprisals, analysts said. ``There is uncertainty about when or if the war will happen, which is weighing on dollar sentiment,'' said Tim O'Dell, who helps oversee $25 billion at Investec Asset Management in London. O'Dell recently reduced his bet that the dollar will fall.
The dollar weakened to $1.0801 per euro at 9:50 a.m. in London, from $1.0767 last night. It yesterday reached $1.0935, its lowest since March 1999. The dollar has shed 2.8 percent against the euro this year and almost 20 percent in the past 12 months. It dropped to 119.97 yen, from 120.12. ``Given the choice between military intervention and an inspections regime that is inadequate because of a failure to cooperate on Iraq's part, we must choose the decisive reinforcement of the means of inspection,'' French Foreign Minister Dominique de Villepin said yesterday. Powell, in an address to the UN yesterday, produced a compilation of intercepted telephone conversations, satellite photographs, and testimony of captives and defectors suggesting that Iraq is hiding its weapons activities and building alliances with terrorist agents. ``Powell risked hardening the views of France and other countries,'' and that's negative for the dollar, said Steve Barrow, a currency strategist at Bear Stearns. He expects the U.S. currency to trade between $1.07 and $1.10 per euro until Feb. 14, when the UN's chief weapons inspectors will report to the Security Council on whether Iraq is cooperating. U.S. President George W. Bush has said that while the U.S. is willing to act without UN authorization, he prefers support.
ECB Rates
The European Central Bank is due to announce its decision on interest rates at 12:45 p.m. London time. All of the 32 economists surveyed by Bloomberg News expect the bank to keep its key rate for the 12 countries sharing the euro at 2.75 percent. Twenty expect lower borrowing costs by April. The dollar may also decline on economists' expectations a government report tomorrow will show the U.S. unemployment rate remained at an eight-year high of 6 percent in January and the economy added fewer than half as many jobs as it lost in the previous two months. ``It is hard to buy the dollar aggressively amid a possibility the U.S. may go to war, when its economic picture is still uncertain,'' said Minori Takeuchi, chief currency strategist at J.P. Morgan Chase & Co. in Tokyo.
`Market Understands'
Any decline in the dollar against the yen may be limited after comments from Zembei Mizoguchi, Japan's vice finance minister for international affairs, fed speculation that Japan may sell its own currency to foster an export-led economic recovery. ``It is good that the market understands what we intend to do,'' he said, explaining the ministry's announcement Friday that it sold yen in January. Finance Minister Masajuro Shiokawa said earlier this week that Japan had sold around 700 billion yen ($5.8 billion) since mid-January. In other trading the dollar fell to 1.3584 Swiss francs, from 1.3636, and the British pound rose to $1.6444, from $1.6408. //www.quote.bloomberg.com