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German, UK reports aid dollar at US open, Iraq eyedWednesday February 11, 9:45 am Eastern Time
NEW YORK, Feb 11 (Reuters) - The dollar opened higher in New York, buoyed as a military strike on Iraq seemed imminent and the mark retreated against the pound on weak German data and heightened speculation of a UK interest rate hike, dealers said.
The mark stayed glued to the 68 yen support area and was also pressured against the Swiss franc, which attracted some safe-haven flows after the commander of U.S. Middle East forces said he would be prepared to strike Iraq in a week or so. ``Sterling/mark pushed dollar/mark up higher, said Jeffrey Yu, a senior dealer at Sanwa Bank Ltd.
``It caught everybody by surprise in sterling and people were trying to buy dollars because of an (expected) imminent attack on Iraq,'' Yu continued.
The Bank of England sparked expectations of another rate snugging, one day after a surprisingly subdued UK retail price report shoved sterling to a one-month low under 2.94 marks.
Sterling/mark brushed 2.97 on Wednesday after the BOE said it was ``more likely than not'' that a modest hike will be necessary at some point. That contrasted with reports showing flat January Pan-German consumer prices and a 1.0 percent year-over-year fall in December German retail sales.
Dollar/mark opened at 1.8205/15, up from 1.8064/69 at Tuesday's close, but off from a high of 1.8232 overseas. The dollar also rose to 124.12/17 yen from 123.24/29.
The drumbeat for action in the gulf seemed to pick up after Marine Corp General Anthony Zinni, speaking to reporters while traveling the region with U.S. Defense Secretary William Cohen to muster support for a U.S.-led attack on Iraq, said, ``We're ready now, but there are a few more pieces to put in.''
Another positive, but largely overlooked, indicator for the dollar was the rise in the Dow industrials to a record high close at 8,296 on Tuesday, dealers said.
Dollar/yen made headway but was largely on the sidelines with Tokyo on holiday. Analysts said the yen felt some pressure from concerns about a possible labor strike in South Korea, which could hinder any economic recovery and cripple efforts to pay back that country's troublesome foreign debt.
``I don't think Iraq is the reason and I don't think the Dow is the reason,'' said Mike Malpede, senior foreign exchange analyst at Refco Group Ltd, of the dollar's overnight rise.
``It's weak inflation data in Germany and a hawkish inflation report from the UK and the yen is kind of sandwiched in between, with concerns about Southeast Asia and Korea.''
The dollar seemed comfortable in its recent well-worn ranges, with resistance tested around 1.82 marks and 124 yen, dealers said.
Traders steered clear of taking on big new yen positions ahead of next week's Group of Seven meeting and extra stimulus measures expected from Japan before G7 finance ministers and central bankers come together in London.
The U.S. data calendar is light this week. Traders will be waiting for testimony by U.S. Treasury Secretary Robert Rubin before a congressional subcommittee at 1000 EST/1500 GMT. Bundesbank president Hans Tietmeyer speaks at 1230 EST.
Elsewhere, the pound rose to $1.6290/00 from $1.6252/62. The dollar rose to 1.4675/85 Swiss francs from 1.4609/14 and to Canadian $1.4350/55 from C$1.4341/46. The Australian dollar slipped to $0.6784/89 from $0.6798/03.