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Dollar Rebounds, Seen as Safest Haven as Syria Attack Looms - (Reuters)

Posted by Chris Advincula on Aug 28, 2013 7:35:00 AM

Wed Aug 28, 2013 4:34am EDT

* Dollar recovers against yen amid Syria tensions

    * Dollar to likely take on dominant safe-haven role

    * Yen falls as BOJ's Iwata says bank will continue QE

    * BoE's Carney speech main focus for sterling


    By Anooja Debnath

    LONDON, Aug 28 (Reuters) - The dollar bounced back from a

two-week low against the yen and climbed versus the Swiss franc

on Wednesday as traders took the view that it is the safest

currency of all as military action against Syria looms.

    Strategists added that the yen slipped after Bank of Japan

Deputy Governor Kikuo Iwata said the bank will continue its

quantitative easing until inflation stabilises at 2 percent.


    The dollar was up 0.5 percent at 97.47 yen,

recovering smartly from an intra-day trough of 96.81 yen which

was its lowest since Aug. 12. It was also up 0.2 percent against

the Swiss franc at 0.9190 francs.

    The United States and its allies appear to be gearing up for

a military strike against Syria, perhaps within days, as

punishment for last week's chemical weapons attacks blamed on

President Bashar al-Assad's government.

    "The yen and Swiss franc have been supported on safe-haven

demand given the developments in Syria, but I think we are now

increasingly going to see the dollar taking on the dominant role

among the safe-haven currencies and gaining broadly, even

against the yen and the Swiss franc," said Ian Stannard, head of

European FX strategy at Morgan Stanley.

    On Tuesday, the dollar had tumbled about 1.5 percent, its

biggest one-day drop versus the Japanese currency since June 11.

Reported options expiries at 97.00 yen and 97.70 yen could keep

the pair close to those levels.

    Stannard said a move above 98.15 yen would be a bullish

signal, while analysts said that any further dips in the pair

would be limited and that the dollar may settle into a range of

roughly 96 yen to 99 yen.

    "There will probably be some yen-selling by Japanese players

if the dollar were to fall below 95 yen," said Daisuke Karakama

at Mizuho Bank in Tokyo, adding that Japanese institutional

investors might buy the dollar if it falls to such levels.

    The euro was up 0.4 percent versus the yen at about 130.42

yen. Against the dollar, the single currency was down

0.1 percent at $1.3376.

    As investors avoided risk, growth-linked currencies like the

Australian and New Zealand struggled.

    The Aussie was down 0.6 percent at $0.8925 while against the

yen it was down 0.1 percent at 87.00 yen after losing

2 percent on Tuesday. A drop below the Aug. 7 low of 86.36 yen

would take the Australian unit to its lowest since December.

    The New Zealand dollar was down 0.6 percent at $0.7754.

    The dollar also benefited from the rout in emerging markets

which have been on shaky ground due to an outflow of hot money

as investors position for the U.S. Federal Reserve to begin

scaling down its bond-buying stimulus next month.

    Markets will focus on Bank of England Governor Mark Carney's

speech later today where he is expected to reiterate his dovish

stance in an attempt to rein in rising market interest rates,

which will weigh on sterling.


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