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Dollar up briefly as Iraq war begins

The dollar rose briefly against the yen and euro after the US launched its war against Iraq and explosions rocked Baghdad.

world Updated: Mar 20, 2003 11:17 IST

The dollar rose briefly against the yen and euro after the United States launched its war against Iraq and explosions rocked Baghdad.

The dollar rose to 120.25 yen at 11:50 am (0250 GMT) just after the White House announced it had begun its military campaign in the Gulf compared with 120.00 yen earlier in the morning, said JP Morgan Chase foreign exchange market analyst Minori Takeuchi.

By midday the greenback had eased slightly to 120.05-08 yen.

The euro slipped to around 1.0550-60 dollars on the news but had recovered to 1.0576 dollars at 12:05 pm.

"The opening stages of the disarmament of the Iraqi regime have begun," White House spokesman Ari Fleischer told a news conference as anti-aircraft fire and air sirens were heard in Baghdad.

Although the US unit rose immediately on the news, it eased slightly as investors awaited new developments, dealers said.

"I do not see much movement in Tokyo time, the dollar will remain on a firm note," said JP Morgan Chase foreign exchange market analyst Minori Takeuchi.

Investors believe the dollar will strengthen if US-led military action is short and successful.

"If there is an easy victory and we see pictures on CNN of Iraqis waving American flags and applauding as the army marches into Baghdad that would be tremendous for the dollar," said Marshall Gittler, senior currency strategist at Deutsche Bank.

"These guys aren't stupid they remember what happened the last time," said Gittler, referring to the 1991 war in Kuwait.

Since then the US military capability has increased, while Iraq's has deteriorated, he added.

A speedy victory in Iraq would boost confidence in the United States and also reduce war expenses, he said.

"If it goes well it will be the greatest blow against terrorism. But it is still early days and there could be terrible battles ahead."

Against the yen, the euro was trading at 127.00 at 12:05 am compared with 127.25-35 Wednesday afternoon in New York.

First Published: Mar 20, 2003 10:12 IST