Dollar drops as bombings of Iraq continue

The dollar fell against other major currencies today, hitting its lowest level against the euro since the start of the Iraq war…

The dollar fell against other major currencies today, hitting its lowest level against the euro since the start of the Iraq war.

President George W. Bush cautioned against any expectation of a quick victory in Iraq, changing his prepared remarks at the last minute to drop an assessment that the campaign was "ahead of schedule".

"The market is at the mercy of news headlines," said Mr Ian Gunner, head of foreign exchange research at Mellon Financial in London. "It is fickle and will continue to trade in this volatile fashion".

The dollar fell to a 10-day low of $1.0744 per euro in the European mid-session, triggering automatic sell orders on the break of $1.0730. It was down 0.18 per cent at 119.78 yen.

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The dollar was erratic after Britain's Admiral Michael Boyce said the army had found chemical weapons suits, arguing they showed Iraqi intent on weapons of mass destruction.

The dollar moved up briefly after the news, but market analysts said it was not clear whether this was actually supportive of the greenback, underlining market confusion in recent sessions about the proper reaction to individual pieces of news from the front.

Clear evidence that Iraq did possess weapons of mass destruction could rally more world support for the otherwise pretty isolated Washington, supporting the dollar. But it would also raise fears that Baghdad could use the arms.