Euro bounces back in Asia on Mideast crisis

The euro bounced back in Asian trade on Tuesday on concerns that the Israeli offensive in the Gaza Strip will bring new instability to the Middle East, dealers said.
The euro bought 1.4094 dollars in the morning in Tokyo, up from 1.3957 dollars in New York, regaining a level it reached in European trade on Monday. The euro rose to 127.57 yen from 126.30 yen.
The dollar was trading at 90.72 yen, slightly up from 90.58 in New York on Monday. Trading remained thin ahead of the New Year holidays.
“Euro-buying sentiment had quickly emerged as the Middle East situation was singled out due to to a lack of other major trading factors,” said Hideki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust and Banking.
Israeli warplanes pounded Gaza for a fourth day on Tuesday in an “all-out” war against the Islamic militant movement Hamas that has killed at least 345 people and prompted rocket fire from the Palestinian enclave.
The dollar often faces selling pressure against the euro during conflicts in the Middle East by highlighting Washington’s heavy reliance on the volatile region’s oil.
“The impact of the Middle East situation is easing as the rise in oil prices appears limited,” said Osamu Takashima, a dealer at Bank of Tokyo-Mitsubishi UFJ.
“But in the long run, selling pressure on the dollar will grow further, reflecting the US economic situation,” Takashima said.
The market is also eagerly awaiting the economic policies of US president-elect Barack Obama, dealers said.
“Because of the high expectations, a single bit of trouble with the administration can easily turn out to be a major negative element,” Inoue said.
Financial markets in Tokyo will be closed for the rest of the week due to New Year holidays. Trading will resume on January 5.

Copyright AFP (Agence France-Presse), 2008