Tokyo, Feb. 7 (Bloomberg) -- The dollar may fall after President George W. Bush said yesterday ``the game is over'' for Iraq, spurring concern the U.S. is moving closer to a war that France, Russia and China have signaled they won't support. The dollar has dropped 1.6 percent against the yen and 7.3 percent versus the euro in the past three months amid speculation the U.S. may have to pay for the war by itself. Preparations for war have prompted some non-U.S. investors to keep their money at home, hurting the U.S. currency, traders said. The dollar traded at 119.83 yen at 3:10 p.m. in Tokyo, versus 119.80 late yesterday in New York. It was also at $1.0807 against the euro, from $1.0832. The U.S. currency headed for its eighth losing week in nine against the yen and eighth in 10 versus the 12- nation European currency.
``Bush's comment suggests the U.S. will go to war regardless of whether it can obtain support from other nations,'' said Akira Takei, who helps manage about 1 trillion yen ($8.4 billion) at Fuji Investment Management Co. ``The war is bad for the dollar because it hinders the U.S. economy and increases the budget deficit.'' Fuji Investment sold the U.S. and Canadian dollars and bought European currencies, and the Australian and New Zealand dollars. It plans to hold them on expectations these currencies will strengthen further, Takei said. The U.S. has spent $2.1 billion on preparations for an attack on Iraq, while it hasn't budgeted the expense or the cost of a war because such costs ``tend to be unpredictable,'' Defense Secretary Donald Rumsfeld said this week. The dollar declined yesterday after government statistics showed U.S. productivity, a gauge of how much an employee produces per hour worked, fell at a 0.2 percent rate in the fourth quarter. A government report today will probably show the U.S. jobless rate held at an eight-year high of 6 percent in January, while the economy added 68,000 jobs, according to a Bloomberg News survey of economists. The economy shed 189,000 jobs over the previous two months.
BOE Rate Cut
The euro may fall against the dollar and the yen after the Bank of England yesterday unexpectedly cut its benchmark interest rate by a quarter percentage point to 3.75 percent, which some traders said may make a rate reduction by the European Central Bank more likely in coming months. The ECB left its rate target unchanged at 2.75 percent yesterday. ``The BOE move makes it seem like the ECB won't be far behind in cutting rates, hurting the euro,'' said Takashi Nakata, head of proprietary foreign exchange trading at BNP Paribas in Tokyo. ECB President Wim Duisenberg, at a press conference after the bank's decision, said the euro's recent strength likely won't hurt the region's economy. He said the euro's gains have damped inflation. He also said a rate cut now ``would drown in the sea of uncertainty.''
North Korea, Iraq
Any gains in the yen may be limited after U.S. Secretary of State Colin Powell told Congress he is resisting calls to rush into negotiations with North Korea, which yesterday said it can launch a ``pre-emptive'' strike if the U.S. increases its forces in South Korea. Concern about North Korea ``can cause significant problems for Japan'' and hurt the yen, said Peter Clay, a foreign exchange strategist at ABN Amro Holdings NV, the eighth-largest trader in the $1.2-trillion-a-day currency market. Hussein ``will be stopped,'' Bush said after a White House meeting with Powell. Bush said he'd welcome a new resolution that makes clear the UN Security Council ``stands by its previous demands'' that Iraq disarm or face ``serious consequences.'' France, Russia and China led Security Council members in calling for the UN to continue arms inspections in Iraq. Along with the U.S. and the U.K., the three are permanent members of the Security Council with the power to veto resolutions. The dollar may fall if the U.S. cannot muster more support from the council, for ``if no other reason than it helps to have allies to shoulder the burden of the war,'' said Paul McNee, chief currency trader at Australia and New Zealand Banking Group in Melbourne. In other trading, the dollar rose to 1.3570 against Swiss franc from 1.3541. The British pound fell to $1.6352 from $1.6383 after the Bank of England rate cut. //www.quote.bloomberg.com