The dollar lost ground again overnight after Wall St failed to maintain an opening rally on the back of the storming of Baghdad. After surging 240 points in the first 45 minutes of trading, the Dow Jones ended the session up just 23 points, while the Nasdaq also pared gains. At 0900, the euro was trading at USD1.0690, up 1pc since yesterday's slump after US troops launched a major ground offensive on Baghdad. "One of the factors holding back the dollar was the failure of US stocks to hold on to early strong gains. The stock market reversed as. traders began to contemplate the problems facing the US economy in the aftermath of the war," said Jenny Pollock, senior economist at AIB Treasury.
The euro's gains have been capped by reports of Saddan Hussein's death in a bomb attack on a bunker in one his residential complexes. His death would accelerate the end of the war on Iraq but buying was limited due to the uncertainty regarding the reports. Pollock added that while the progress of the war in Iraq continues as an important factor, currency markets are beginning to refocus back more on to economic fundamentals. //www.fxcentre.com