The dollar gained against the yen and Swiss franc in London after the U.S. handed over its authority in Iraq to a transitional government two days early. ``The fear was that there may have been some kind of disruption to the transition on Wednesday,'' said Kamal Sharma, a currency strategist in London at Dresdner Kleinwort Wasserstein. ``By moving the process forward, the coalition may have put the rebels on the back foot, taken them a bit by surprise.'' Against the yen, the dollar advanced to 107.83 as of 8:57 a.m. in London from 107.59 in New York late on Friday, according to EBS, an electronic foreign-exchange dealing system. The U.S. currency also gained against the Swiss franc after Iraqi Foreign Minister Hoshyar Zebari said the date of the handover will be brought forward.
Paul Bremer, the top U.S. civilian administrator in Iraq, handed over ``legal authority'' to Iraq's chief justice this morning, Victoria Whitford, a spokeswoman for the coalition forces in Baghdad, said in a telephone interview. The step will show the interim government is ready to tackle terrorists trying to undermine it, Zebari said after a meeting with U.K. Prime Minister Tony Blair at a summit of the North Atlantic Treaty Organization in Istanbul. ``In the near-term this is dollar positive,'' said David Mann, a currency strategist in London at Standard Chartered Bank, the most accurate forecaster for the dollar against the euro in the first quarter, according to a Bloomberg survey. ``However there is still a big cloud hanging over Iraq,'' and ``if the levels of attacks get worse that would benefit currencies such as the Swiss franc.'' Against the Swiss franc, the dollar gained to 1.2505 from 1.2465 late on Friday. The dollar also traded at $1.2166 per euro from $1.2178, after earlier advancing as high as $1.2122.
Short-Term Boost
Violence has been increasing in recent days as the U.S. prepares to hand over authority to the temporary government headed by Ayad Allawi. More than 100 people died and 300 were injured in bomb attacks in Baghdad and four other Iraqi cities on Thursday. On Saturday, a car bomb killed 23 Iraqi civilians south of Baghdad. This morning a U.S. marine and three U.K. soldiers were reported killed. ``Traders took the Iraq early handover as a kind of indication that it may be able to decrease tension in Iraq at least for now,'' said Tommy Ong, vice president of the treasury and markets at DBS Bank (Hong Kong) Ltd., a unit of Southeast Asia's biggest lender. ``The news in the short term may give the dollar a boost.''
Germany's Eichel
The euro also fell earlier against the dollar after German Finance Minister Hans Eichel said an economic recovery in Europe's second-largest economy isn't firm yet, Handelsblatt said, citing an interview. Germany's Ifo economic institute reported Friday business confidence fell to a nine-month low in June. European Central Bank Chief Economist Otmar Issing on Saturday called the slide in the Ifo's index ``disappointing.'' The ECB will keep borrowing costs unchanged this week, and the Federal Reserve will raise its benchmark interest-rate target from a 46-year low, economists in Bloomberg News surveys predicted. ``Europe continues to be a low growth economy, said Paul Robson, a currency strategist in London at Royal Bank of Scotland Group Plc. ``The euro will probably remain weak.'' Gains in the yen may be limited by speculation a government report tomorrow will show Japan's factory output rose for a third month in May, helping extend Japan's longest economic expansion since 1997.
`Quite Bullish'
Seventy-one percent of the 87 traders, investors and strategists polled Friday from Tokyo to New York advised buying yen, up from 53 percent a week earlier, according to a weekly survey by Bloomberg. ``We're quite bullish on the yen,'' said Jonathan Prince, head of institutional currency sales in Sydney at National Australia Bank Ltd., the nation's biggest lender. ``Economic data out of Japan really have been outperforming. We do look for further yen strength.'' Japanese industrial production probably rose 2.5 percent from April, seasonally adjusted, the Ministry of Economy, Trade and Industry will say at 8:50 a.m///www.bloomberg.com