The euro plunged almost 2pc against the dollar overnight after the US indicated that a war with Iraq would be delayed. The dollar bounce was sparked by US Secretary of State Colin Powell's comments that the US would not push for a UN vote on Iraq today. Speaking last night, he said that all options remained on the table and that that talks on a new resolution on Iraq would continue over the weekend. As the Dow Jones and the Nasdaq reacted to the news, surging by 3.6pc and 4.7pc, respectively, the dollar pushed the euro down 1.9pc to as low as USD1.0781. At 0815 this morning, the euro had regained a little ground, rising to USD1.0810.
"Key levels in many major dollar pairings were penetrated as market participants took profits on some of their "war" positions," said Geraldine Concagh, senior economist at AIB Treasury, who added that the dollar rally is not likely to be sustained. "While there is scope for another attempt at a corrective rally, it is doubtful that it will be sustained with the treat of war, as well as ongoing uncertainty about the outlook for the economy and the prospect of another interest rate cut, still hanging over the dollar," she said. //www.fxcentre.com