Wednesday July 9, 2008 - 11:11:11 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar knocked by geopolitical tensions, oil
* Tensions in Iran, Turkey weigh on dollar
* Oil resumes climb as geopolitical worries grow
* Dollar index down 0.25 pct at 72.775
(Changes byline, updates prices, adds quotes)
By Toni Vorobyova
LONDON, July 9 (Reuters) - The dollar eased on Wednesday as
oil prices rebounded, after geopolitical tensions were pushed
back onto investors' radar by news of Iran test-firing missiles
and of an armed attack on the U.S. consulate in Turkey.
Iran's state media reported Iran had test-fired nine long-
and medium-range missiles, including one which it has previously
said could reach Israel and U.S. bases in the region.
Tensions in the region were further stoked after three
policemen and three gunmen were killed in an attack on the
United States consulate in Istanbul.
Also in Turkey, three German tourists were kidnapped by
Kurdish guerrillas, broadcaster CNN Turk reported a local
governor as saying.
A pick-up in geopolitical concerns also gave safe-haven
currencies like the Swiss franc <CHF=> a bid tone, as well as
boosting the price of oil CLc1 and gold <XAU=>.
"The broader geopolitical risk -- with the uncertainties
revolving around the newsflow from Iran and ... Turkey -- is
playing into market sentiment," said Jeremy Stretch, strategist
"And if we are seeing the oil price reversing the pull back
from yesterday one would suspect, in view of the current
correlation between oil and the dollar, that euro/dollar would
probably rally as a consequence."
However analysts said geopolitics could soon take a back
seat again once macroeconomic newsflow picks up after a lack of
first tier economic releases from U.S. or euro zone on
The dollar index, which tracks the greenback against a
basket of six major currencies, fell 0.25 percent on the day to
72.775 .DXY by 1032 GMT.
Against the Swiss franc, the dollar fell 0.2 percent to
1.0321 francs and versus the Japanese unit, it was little
changed at 107.43 yen <JPY=>.
Another mild dollar negative was the fact that Group of
Eight leaders did not speak out against the U.S. currency's
weakness in the communique culminating their three-day meeting.
The euro gained 0.2 percent to $1.5703 <EUR=> and edged up
0.1 percent to 168.59 yen <EURJPY=R>.
Despite broad U.S. dollar weakness, the Aussie dollar <AUD=>
lost ground after a drop in consumer confidence and following a
report showing demand for home mortgages suffered the biggest
monthly fall in eight years, the latest signs the economy is
losing steam. [ID:nSYD27641]
The Aussie fell to a near three-week low of $0.9474.
Oil resumed its climb in the wake of the missile test with
U.S. crude CLc1 gaining nearly $2 to above $137 a barrel. Oil
had fallen more than $5 on Tuesday after forecasters said an
Atlantic hurricane would steer clear of offshore oil platforms
but it remained not far off its all-time high of $145.85.
"In our view energy prices are unlikely to sustain anything
like the pace of recent falls and so the USD index can re-target
its recent 72.00 low," ING said in a note to clients.
The dollar had been relatively steady in early Asian trade
after Federal Reserve Chairman Ben Bernanke assured investors
the central bank would keep assisting financial markets as long
as they remained frail.
Bernanke said the Fed might keep open emergency lending
facilities for big Wall Street firms -- launched after the
collapse of Bear Stearns -- longer than planned. [ID:nN08304308]
Those remarks helped relieve fears the top U.S. mortgage
lenders, Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), could have
to raise $75 billion of capital due to upcoming accounting rule
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