LONDON, Dec 23 - The dollar edged lower against the euro and the yen on Tuesday ahead of Christmas holidays in many markets, as investors juggled a heightened U.S. security alert, economic expectations and intervention worries. Tokyo markets were shut for a holiday on Tuesday and several countries begin Christmas holidays on Wednesday. But the recent downtrend for the dollar continued, following a heightened U.S. security alert at the weekend, and persistent worries about the U.S. ability to attract investment flows to cover its current account deficit. "Security is an ongoing theme and we have seen some rise in risk aversion on the back of the security alert," said Mitul Kotecha, head of global foreign exchange research at Credit Agricole Indosuez. "Data today will confirm robust U.S. growth, but underlying negative factors for the dollar remain in place." The dollar eased to $1.2414 per euro by 0820 GMT, compared with record lows of $1.2447 set on Monday, the U.S. currency's 14th record low in 17 trading sessions. The dollar also gave up 0.20 percent against the yen to 107.35 , just over half a yen above three-year lows set earlier this month.
Traders remain wary of yen-weakening intervention by the Japanese authorities during the thin holiday period, after Japan spent record amounts this year in order to curb the strength of the yen and protect the country's export-led recovery. "I don't think they (BOJ) will chase the market, but if there is any persistent strength in the yen they will definitely be there," said Greg Gibbs, senior currency strategist at the Royal Bank of Canada in Sydney.
SECURITY TENSION
The U.S. government raised its security alert on Sunday to orange, the second-highest level, saying there was a high risk of an attack in the holiday period. Geopolitical tensions have weighed on the dollar for much of 2003 -- before, during and after the Iraq war. The dollar is nearing the end of the year down more than 15 percent against the euro and nearly 10 percent against the yen. U.S. final third quarter GDP, due at 1330 GMT, is expected to be unrevised at a healthy 8.2 percent annual growth. The final University of Michigan consumer sentiment survey for December, due at 1445 GMT, is forecast to be revised up to 91.0 from the preliminary 89.6, though still below November's reading of 93.7. While the firmer data could mean the U.S. dollar would bounce back in the not too distant future, the chances of that happening before early 2004 were negligible, traders said. "The dollar is going lower despite the U.S. economy looking very robust and there is every chance that we get an acceleration in that dollar downtrend after Christmas," a Singapore-based trader said.//www/.com