FOREX -Dollar gains as Syria worries trigger safety bid
* Dollar recovers against yen amid Syria tensions * Yen falls as BoJ's Iwata says central bank will continue QE * U.S. pending home sales drop, muddle Fed QE taper debate By Gertrude Chavez-Dreyfuss NEW YORK, Aug 28 (Reuters) - The U.S. dollar rallied across the board on Wednesday as investors sought the greenback's safety given the possibility of Western military action in Syria. Investors, having bought the yen and Swiss franc a day earlier amid Syria-related concerns, also locked in steep gains in those currencies on Wednesday. The dollar, yen and Swiss franc are considered safe havens in times of economic stress and geopolitical turmoil. The United Nations Security Council was set for a showdown over Syria on Wednesday as Britain sought authorization for Western military action that Russia called premature and seemed certain to block. "The dollar's rally is clearly related to Syria," said David Starkey, senior market analyst, at Cambridge Mercantile Group in Toronto. "Investors realize that the dollar is still the safest currency to be in right now. Also momentum is indicating that it's time for the dollar to pick up a little ground." In midday trading, the dollar was up 0.7 percent at 97.66 yen, recovering from an intraday trough of 96.83 that matched the low seen two weeks ago, according to Reuters data. The yen had earlier slipped after Bank of Japan Deputy Governor Kikuo Iwata said the bank will continue its quantitative easing until inflation stabilizes at 2 percent. On Tuesday, the dollar had tumbled about 1.5 percent, its biggest one-day drop against the Japanese currency since June 11. Reported options expiries at 97.00 yen and 97.70 yen could keep the pair close to those levels. Ian Stannard, head of European FX strategy at Morgan Stanley in London said a move above 98.15 yen would be a bullish signal for the dollar, while analysts said that any further dips in the pair would be limited and that the dollar may settle into a range of roughly 96 yen to 99 yen. The dollar was also up 0.6 percent against the Swiss franc at 0.9221 franc. The greenback was up 0.4 percent against a basket of currencies at 81.514. The euro was up 0.1 percent against the yen at 130.10 yen . Against the dollar, the single currency was down 0.5 percent at $1.3322. Analysts at Citi said the euro could struggle if the U.S. Federal Reserve trimmed its stimulus which would tighten global monetary conditions, raise peripheral funding costs, and hurt the bloc's nascent recovery. The market in general still believes the Fed will reduce its bond purchases in September, but given the recent spate of weak economic data, there are some economists saying that tapering could be delayed especially in the light of the U.S. budget debate next month. U.S. pending home sales data on Wednesday showed a drop of 1.3 percent in July. Jacob Oubina, senior U.S. economist with RBC Capital Markets in New York, said it's all about the employment number next week. "If you get strong data, the Fed is going to lock in with tapering over the next couple of months ... We think it's going be October because of the possible issues from the debt ceiling fight in Washington in September. With investors avoiding risk, growth-linked currencies struggled. The Australian dollar was down 0.5 percent at US$0.8920 and the New Zealand dollar was flat at US$0.7800.