FOREX -Dollar rebounds, seen as safest haven as Syria attack looms
* Dollar recovers against yen amid Syria tensions * Dollar to likely take on dominant safe-haven role * Yen falls as BOJ's Iwata says bank will continue QE * BoE's Carney speech main focus for sterling By Anooja Debnath LONDON, Aug 28 (Reuters) - The dollar bounced back from a two-week low against the yen and climbed versus the Swiss franc on Wednesday as traders took the view that it is the safest option given the risk of Western military action in Syria. Strategists added that the yen slipped after Bank of Japan Deputy Governor Kikuo Iwata said the bank will continue its quantitative easing until inflation stabilises at 2 percent. The dollar was up 0.4 percent at 97.44 yen, recovering from an intra-day trough of 96.81 yen which was its lowest since Aug. 12. It was also up 0.4 percent against the Swiss franc at 0.9207 francs. The dollar was up 0.4 percent against a basket of currencies at 81.430. The United States and its allies appear to be gearing up for a military strike against Syria, perhaps within days, as punishment for last week's chemical weapons attacks blamed on President Bashar al-Assad's government. "The yen and Swiss franc have been supported on safe-haven demand given the developments in Syria, but I think we are now increasingly going to see the dollar taking on the dominant role among the safe-haven currencies and gaining broadly, even against the yen and the Swiss franc," said Ian Stannard, head of European FX strategy at Morgan Stanley. On Tuesday, the dollar had tumbled about 1.5 percent, its biggest one-day drop versus 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. Stannard 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. "There will probably be some yen-selling by Japanese players if the dollar were to fall below 95 yen," said Daisuke Karakama at Mizuho Bank in Tokyo, adding that Japanese institutional investors might buy the dollar if it falls to such levels. The euro was up 0.1 percent against the yen at 130.03 yen . Against the dollar, the single currency was down 0.4 percent at $1.3348. 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. "Uncertainty about the political outlook in Italy could pick up as well in coming weeks... renewed pick up in peripheral and growth risks could make case for more ECB easing before long," said Valentin Marinov, head of European G10 FX strategy at Citi. Financial markets remained wary about the prospects of fresh political instability in Italy. With investors avoiding risk, growth-linked currencies struggled. The Australian dollar was down 0.7 percent at $0.8922 and the New Zealand dollar was down 0.5 percent at $0.7754. Markets will focus on Bank of England Governor Mark Carney's speech later today where he is expected to reiterate his dovish stance in an attempt to rein in rising market interest rates, which will weigh on sterling.
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