Wednesday July 9, 2008 - 20:29:25 GMT
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Reuters - www.reuters.com
FOREX NEWS-Iran saber-rattling sends dollar tumbling broadly
(Recasts; updates prices, changes byline)
* Mideast tensions undermine U.S. dollar
* Oil pulls out of two-day steep decline
* Lingering credit worries add to selling momentum
By Lucia Mutikani
NEW YORK, July 9 (Reuters) - The dollar fell on Wednesday
as news that Iran test-fired nine missiles halted oil's steep
drop and unsettled Wall Street stocks, with investors concerned
about the impact of soaring energy prices on the fragile
An apparent attack on the United States consulate in
Istanbul, Turkey also added to negative global sentiment toward
the greenback and caused investors to seek out safe-haven
currencies such as the Japanese yen <JPY=> and Swiss franc
<CHF=>, analysts said.
"It's Iran and Turkey we should be blaming today (for the
dollar's fall)," said Greg Salvaggio, vice president of trading
at Tempus Consulting in Washington.
"What we have seen happen today is the reversal of oil
prices and a little bit of uncertainty re-emerging in equity
markets, causing investors who were starting to get a little
excited about the dollar again to jump back on the euro," he
Pressure on the U.S. currency was also exerted by lingering
fears of more credit-related write-downs at some financial
Oil recovered some of Tuesday's sharp drop with U.S. crude
CLc1 gaining nearly $2 to rise above $138 a barrel, before
settling near flat at $136.05 a barrel. Higher oil prices tend
to hurt the dollar because the United States is a heavy energy
Iran said it had test-fired missiles that could reach
Israel and U.S. bases in the region, and warned it was ready to
retaliate for any attack over its disputed nuclear projects.
The New York Board of Trade's dollar index, which tracks
the dollar's performance against six currencies, fell to a
session low of 72.574 .DXY, down 0.5 percent while the euro
rose 0.4 percent to $1.5734 <EUR=>.
The dollar dropped 0.6 percent to 106.79 yen and fell 0.4
percent to 1.0290 Swiss francs.
WEAK EURO ZONE DATA IGNORED
The market was unperturbed by downward revisions to
first-quarter gross domestic product growth in the euro zone
and data showing a fall in French and German exports in May.
At the same time, European Central Bank Governing Council
member Miguel Angel Fernandez Ordonez said the ECB should
appear willing to raise interest rates further to keep prices
under control, even if there is a risk that the economy might
"There is a clear focus on interest rate differentials. The
ECB is unlikely to cut rates at anytime and the Fed, although
it has warned about inflation, we believe it's unlikely to hike
rates anytime soon," said Tempus's Salvaggio. "There are still
worries among traders about the longer term systemic risk in
the U.S. financial system."
Credit-related worries and an early spike in oil prices
depressed U.S. stocks, adding to the dollar's poor performance
against the yen and Swiss franc.
While Federal Reserve Chairman Ben Bernanke's announcement
on Tuesday he was willing to keep the discount window borrowing
open for investment banks into 2009 was positive, worries about
the balance sheets of many financial institutions remained.
Investors will be hoping that Bernanke will maintain his
calming tone when he testifies on regulatory restructuring
before the House Financial Services Committee on Thursday.
"Bernanke is going to offer more support for the dollar, we
might might see a dip in the oil prices as well," said Dan
Cook, senior market analyst at IG Markets in Chicago.
"For the most part with euro/dollar, baring anything like a
military strike, we're going to see it continue to trade in a
1.53-1.59 range. It seems like the market is trying to sort
itself out, there is no great news coming out from anywhere."
(Additional reporting by Gertrude Chavez-Dreyfuss; editing by
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