* Dollar recovers against yen amid Syria tensions
* Yen falls as BoJ's Iwata says central bank will continue
* U.S. pending home sales drop, muddle Fed QE taper debate
By Julie Haviv
NEW YORK, Aug 28 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
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 widely seen as 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 afternoon trade, the dollar was last up 0.7 percent at
97.74 yen, recovering from an intraday trough of 96.83
that matched a recent low set two weeks ago, according to
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 against
the yen, 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 up 0.5 percent against the Swiss franc
at 0.9220 franc. The greenback was also up 0.4 percent against a
basket of currencies at 81.514.
Meanwhile, the euro traded higher against the yen, last up
0.3 percent at 130.28 yen. Against the dollar, the
euro zone currency was down 0.5 percent at $1.3332.
Analysts at Citi said the euro may 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.
With investors avoiding risk, growth-linked currencies
struggled. The Australian dollar was down 0.4 percent
at US$0.8944 and the New Zealand dollar was flat at
The market generally 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 looming U.S.
budget debate next month in Washington.
U.S. economic data on Wednesday showed pending home sales
dropped 1.3 percent in July from June.
But Jacob Oubina, senior U.S. economist with RBC Capital
Markets in New York, said the market's data focus is all on 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," he said.