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FX round-up: Iran missile test weighs on dollar

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Date: Thursday 10 Jul 2008

LONDON (ShareCast) - The dollar surrendered the previous day’s gains as traders turned their positions amid credit market woes and news of Iran’s missile testing.

Iran said it tested missiles that could reach Israel and US bases in the region and issued a warning that it was ready to fight back if an attack was launched over its nuclear programme.

Traders turned to safe haven currencies like the yen and the Swiss franc.

The greenback had received a temporary boost earlier in the week following comments from Federal Reserve Chairman Ben Bernanke. However by Wednesday focus turned to the gloom on Wall Street with major indices buckling under credit market fears and renewed fears about tensions in the Middle East.

The euro gained against the dollar following comments from European Central Bank President Jean-Claude Trichet. He said consumer price inflation in the euro zone was expected to see just gradual moderation over the next year, despite inflation currently running at 4%, double the central bank’s target of 2%.

Otherwise the euro was unmoved by data which showed downward revisions to first-quarter GDP growth in the euro zone and separate reports which showed a decline in French and German exports in May.

Sterling meanwhile gained against the weaker dollar but was hardly moved against the euro as traders digested yet more grim data on the UK economy.

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