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FOREX-Dollar rises to 4-week high as Syria spurs demand for safety
August 30, 2013 / 8:20 PM / in 4 years

FOREX-Dollar rises to 4-week high as Syria spurs demand for safety

* Syria conflict continues to haunt market
    * U.N. investigators finish gathering samples in Syria
    * U.S. makes case for limited military action
    * Weak U.S. consumer spending muddles Fed outlook
    * Speculators raise bets in favor of the dollar

    By Julie Haviv
    NEW YORK, Aug 30 (Reuters) - The U.S. dollar rose to a
four-week high against a basket of major currencies on Friday,
ending the month with its strongest   gain since May, as the
possibility of a U.S. military strike on Syria had investors
shunning risk. 
    The United States made clear on Friday that it would punish
Syrian President Bashar al-Assad for the "brutal and flagrant"
chemical weapons attack that it says killed more than 1,400
people in Damascus last week. 
    U.S. Secretary of State John Kerry made a broad case for
limited U.S. military action against Syria for its alleged use
of chemical weapons, saying it could not go unpunished for such
a "crime against humanity." 
    "Today's combination of risk aversion (on Syria) and
expectations of Fed tapering next month suggest we will have
continued dollar strength next week," said Camilla Sutton, chief
currency strategist at Scotiabank in Toronto.
    "Next week should be quiet leading up to Friday's nonfarm
payrolls report, but the technicals and fundamentals suggest we
have entered a new period of U.S. dollar strength," she said. 
    Worries about a Syrian conflict pushed the dollar index,
which tracks the greenback against a basket of six major
currencies, to a four-week high of 82.263.
    The dollar index, which last traded up 0.2 percent at 82.078
, was also buoyed by weakness in the euro, the largest
component of the index, which fell on soft data out of the
    A team of U.N. investigators has finished gathering samples
and evidence in Syria related to a suspected chemical weapons
attack that killed hundreds of people in suburbs near Damascus
last week and is packing up to leave, a U.N. spokesman said on
    A U.S. intelligence report disclosed that there was "high
confidence" that Syrian forces had used chemical weapons
multiple times in the last year, including the Aug. 21 attack
outside Damascus. 
    The dollar index was up 0.9 percent on the week, its third
straight weekly gain. After falling for two straight months, the
dollar index gained 0.8 percent in August, its best gain since
    Currency speculators, meanwhile, increased their bets in
favor of the U.S. dollar in the latest week, according to data
from the Commodity Futures Trading Commission released on
Friday, snapping five straight weeks of declines.
    The value of the dollar's net long position rose to $15.82
billion in the week ended Aug. 27 from $13.54 billion the
previous week.
    Looking ahead, next Friday's nonfarm payrolls report should
be the highlight of the week since the state of the jobs market
is key to Federal Reserve policy. A strong number should affirm
expectations that the Fed will pull back on its monetary
stimulus when it meets later in the month. 
    U.S. financial markets will be closed on Monday in
observance of the U.S. Labor Day holiday.
    Friday's U.S. data were soft, save for the manufacturing
index for the Midwest, which saw the index for prices paid, an
inflation signal, rise to its highest since November.
    But the 0.1 percent increase in both personal income and
consumption was lower than expected for the month of July. many
market participants, however, believe those numbers won't
prevent the Federal Reserve from paring back its stimulus next
month, even if the reduction is at a smaller scale.
    The euro was down 0.2 percent at $1.3214 after
earlier touching a five-week low of $1.3172. The currency
slipped from highs after data showed benign inflation and
elevated unemployment at 12.1 percent. 
    Investors will be wary of buying the euro before next week's
European Central Bank interest rate meeting, where policymakers
are likely to reiterate their pledge that rates will be low for
some time as economic recovery sets in slowly.
    "Euro zone unemployment shows that the real economy is in
dire straits and underlines that the ECB must keep monetary
policy super-accommodative for years to come," said David Brown,
economist at New View Economics.
    The dollar fell 0.2 percent to 98.14 yen, according
to Reuters data.

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