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Euro bounces back in Asian trade following Middle East conflicts

The euro bounced back in Asian trade yesterday on concerns that the Israeli offensive in the Gaza Strip will bring new instability to the Middle East, dealers said.
The euro bought US$1.4096 in the afternoon in Tokyo, up from US$1.3957 in New York, regaining a level it reached in European trade on Monday. The euro rose to 127.16 yen from 126.30 yen.
The U.S. dollar was trading at 90.22 yen, down from 90.58 in New York on Monday. Trading remained thin ahead of the New Year holidays.
The European single currency remained in striking distance of parity with the beleaguered British sterling, trading at 0.9711 pounds, just down from an all-time high reached a day earlier.
"Euro-buying sentiment had quickly emerged as the Middle East situation was singled out due to a lack of other major trading factors," said Hideki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust and Banking.
But he said the euro's gains were capped after European Central Bank vice president Lucas Papademos was quoted in a newspaper at hinting on the need for another rate cut.
The dollar often faces selling pressure against the euro during conflicts in the Middle East by highlighting Washington's heavy reliance on the volatile region's oil.
"The impact of the Middle East situation is easing as the rise in oil prices appears limited," said Osamu Takashima, a dealer at Bank of Tokyo-Mitsubishi UFJ.
"But in the long run, selling pressure on the dollar will grow further, reflecting the U.S. economic situation," Takashima said.
The market is also eagerly awaiting the economic policies of U.S. president-elect Barack Obama, dealers said.
"Because of the high expectations, a single bit of trouble with the administration can easily turn out to be a major negative element," Inoue said.
The dollar was mixed against other Asian currencies.
It rose to 11,150 Indonesian rupiah from 11,100, to 47.50 Philippine pesos from 47.40 and to 1.4445 Singapore dollars from 1.4422. But the greenback fell to 1,259.35 Korean won from 1,268.90, to NT$32.86 from NT$32.99 and to 34.86 Thai bhat from 35.06.