The dollar firmed, European stocks rose and oil prices dipped today after Washington said it would make a last diplomatic effort to avert war with Iraq and the US central bank left interest rates unchanged.
Safe-haven gold and government debt prices fell as US administration officials said the White House was opening a final "diplomatic window" with allies to try to avoid the conflict over UN demands that Iraq give up weapons of mass destruction.
The dollar firmed after a rally on Wall Street following the US Federal Reserve's widely expected decision to leave rates at a four-decade low.
Fed policymakers said risks to the US economy remained evenly balanced between higher prices and renewed downturn and expressed hope the US economy would pick up once fears of war with Iraq have lifted.
The euro was last trading around $1.0760, up more than half a per cent from its New York close. The dollar hit a three-year low beyond $1.09 on Monday.
European stocks rose, led by software group SAP, which beat 2002 targets, and handset maker Nokia.
The FTSE Eurotop 300 index of pan-European blue chips was up 1.4 per cent; the narrower DJ Euro STOXX 50 index was up 1.53 per cent.
In New York last night the Dow Jones ended up 0.27 per cent and the Nasdaq closed 1.18 percent higher .
Gold, seen as a safe place for investors to put their money in times of geopolitical turmoil, fell in Europe. Spot gold, which has risen some 7 per cent this year, was quoted at $364. an ounce, compared with $366 at yesterday's New York close.
Oil prices dipped on renewed hopes war could be averted by the US diplomatic push. Brent crude for March delivery was down 17 cents at $30.85 a barrel.
The threat of war in the Gulf, which supplies 40 per cent of world crude exports, and a strike in Venezuela, have pushed up prices 35 per cent since late November.