LONDON (AFP) – The dollar fell versus the euro and yen on Monday, weighed down by escalating violence between Israel and Hamas in Gaza, dealing a further blow to the US economy, dealers said.
In late morning trading, the European single currency jumped to 1.4278 dollars from 1.4025 dollars in New York late on Friday.
Against the Japanese unit, the dollar dropped to 90.44 yen from 90.78 yen on Friday.
Israel’s Defence Minister Ehud Barak said on Monday that Israel was in an “all-out war against Hamas” as the Jewish state continued its massive bombardment of the Islamist movement’s installations in Gaza.
The dollar often faces selling pressure during conflicts in the Middle East which highlight Washington’s heavy reliance on the volatile region’s oil, with crude prices also rising as a result.
“The developments in the Middle East are likely to keep fuelling the euro at least for a day or two,” Yuji Saito, head of foreign exchange at Societe Generale, told Dow Jones Newswires.
The European single currency meanwhile rose to an all-time high against sterling at 0.9722 pounds, putting parity within sight.
“The euro will probably touch parity with sterling in two weeks,” Saito said.
Sterling has hit a series of record lows versus the euro over the past month on expectations that the Bank of England will continue to slash interest rates amid gloomy economic data from Britain.
The dollar has also dropped sharply against the yen as more signs emerge showing that the US economy is in a dire state.
Dealers said the market could see limited movement until US President-elect Barack Obama is inaugurated on January 20 amid hopes that his administration will give a boost to the troubled US economy.
In the meantime, the market was awaiting Tuesday’s release in the United States of consumer confidence data for December.
In London trading on Monday, the euro changed hands at 1.4278 dollars against 1.4025 dollars late on Friday, at 129.10 yen (127.33), 0.9722 pounds (0.9614) and 1.5024 Swiss francs (1.5018).
The dollar stood at 90.44 yen (90.78) and 1.0523 Swiss francs (1.0705).
The pound was at 1.4687 dollars (1.4569).
On the London Bullion Market, the price of gold rallied to 885.62 dollars an ounce from 843.50 dollars late on Friday. Gold is seen as a haven in times of geopolitical unrest, such as the current violence in Gaza.