/www.fxserver.com/ New York - The dollar built on Wednesday's gains in the overnight session and was trading higher against all major rivals on Thursday morning in New York, as traders have watched coalition forces sweep within four miles of the city gates of Baghdad, signaling that an end to the Iraqi war may be near.
"Instead of predicting the dollar's moves by following fundamentals, forecasting the dollar has become forecasting the developments of the war," said Marc Chandler, chief currency strategist with HSBC in New York.
Coalition forces have surrounded Baghdad's main airport and were poised to attack it, said Brig Gen Vincent Brooks of US Central Command at a press conference early on Thursday.
"There is increasing evidence that the Baghdad regime cannot control its own forces," Brooks said.
Analysts also noted that the dollar could push up to even greater gains against the euro upon more solidly positive news out of Iraq.
Should the European currency fall through a key support level of $1.0685, analysts believe the door could be open to the dollar trading at $1.0600.
"I think we're going to need to see a strong equity move today or more absolute positive news out of the Iraq war," said Tim Mazanec, senior currency strategist with Investor's Bank & Trust in Boston. "If that happens, look for the dollar to continue its gains."
Around 15:45, the dollar was trading at &yne;119.34, even from ?119.34 midday in London, but up from ?118.92 late Tuesday in New York. The euro was trading at $1.0726, up from $1.0705 earlier in London, but down from $1.0765 late Tuesday. Against the Swiss franc, the dollar was at Sf11.3824, up from Sf11.3794 late Tuesday. Sterling was at $1.5641, down compared with $1.5665 Tuesday.
So total has been the market's focus on events in Iraq, that a meeting of the European Central Bank in Rome passed virtually unnoticed, as did ECB President Wim Duisenberg's comments that the euro-zone economy remains weak and will likely strengthen only moderately this year.
Meanwhile, the US Labor Department reported that initial jobless claims rose by a larger-than-expected 38 000 to 445 000 in the week that ended March 29. That marked the highest number since April 13, 2002. The four-week average climbed by 2 500 to 426 250, but the dollar appeared to shrug off the data.