Tokyo, March 27 (Bloomberg) -- The dollar may fall for a fourth day after President George W. Bush said the war in Iraq is ``far from over,'' feeding concern the conflict will be longer than first expected and hurt the U.S. economy. The currency traded at 119.86 yen at 3:19 p.m. in Tokyo, versus 119.94 late yesterday in New York. It was as low as 119.60 after an article on the Washington Post Web site said some senior U.S. military officers believe the war is likely to last for months. The U.S. currency was at $1.0700 per euro, from $1.0695. ``The longer it takes, the bigger the damage to the U.S. economy, and that hurts the dollar,'' said Motoshi Imura, senior manager of the foreign exchange and treasury division at Bank of Tokyo-Mitsubishi Ltd. The U.S. currency may fall to 119.60 yen today, he said.
The dollar climbed back from its lowest level versus the yen amid speculation Japan may sell yen to stem the gain in its currency. Vice Finance Minister for International Affairs Zembei Mizoguchi said Japan will act to quell large swings in the currency. War may slow the U.S. economy by eroding consumer and business sentiment, crimping demand for the dollar, traders said. U.S. reports yesterday showed durable goods orders fell for the third month in four and new home sales declined to the slowest pace in more than two years. The week-old war may weigh on hiring, investment and growth that measured about 1.4 percent at an annual rate in the final three months of 2002. The Commerce Department is scheduled to release its final estimate of fourth-quarter growth later today.
Growing Risk
Iraqi forces are moving south from Baghdad in a large convoy toward the U.S. Army in southern Iraq, the U.S. Central Command said. A tank unit at the leading edge of the U.S. advance on Baghdad is bracing for a fight with the convoy of 1,000 Iraqi vehicles, Cable News Network reported.
Dozens of U.S. Marines were injured by friendly fire, which took place around the city of Nasiriyah, the Agence France-Press e reported. The dollar pared loss against the yen on speculation Japan will sell its currency for a third month. A stronger yen erodes the profits exporters earn on overseas sales. Exports account for about 11 percent of the Japanese economy. Japan sold 1.2 trillion yen ($10 billion) in January and February. The dollar has fallen 1.7 percent against the yen since reaching a three-month high of 121.88 yen on March 21.
Yen Moves
``People don't want to push the dollar below 119.50 yen, where some speculate the authorities may come in,'' said Shigehiro Kamimura, market trading department manager at Resona Bank Ltd. ``The dollar looks weak, but its decline should be limited to 119.50 yen today.'' Mizoguchi said Japan ``continues to watch the market closely and will take necessary steps to avoid large currency swings.'' Japanese officials ``want to keep the dollar above 120 yen,'' said Jake Moore, currency strategist at Barclays Capital, the 10th- largest trader in the $1.2-trillion-a-day foreign-exchange market. ``It would make sense for them to be in the market'' selling yen around that level. The dollar may trade between 119 yen and 122 yen, he said.
A lengthy war may still weaken the dollar, traders said. Bush asked Congress this week for $74.7 billion in extra spending this year to pay for combat costs, humanitarian aid and homeland security. The Senate approved a $2.2 trillion budget that slashed Bush's 10-year tax cut proposal by more than half to $350 billion. ``The prospects of the longer conflict, the recent weak economic data and lesser tax cuts are all weighing on the dollar,'' said Shohgo Nagaya, a foreign-exchange manager at Nomura Trust and Banking Co. In other trading, the British pound rose to $1.5763 from $1.5742. The dollar was little changed against the Swiss franc at 1.3805 francs. The euro held against the yen at 128.23. //www./quote.bloomberg.com