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Yen firms in Asia on Iraq, pound hits 5-year high

The yen rallied in Asia on Monday on growing fears about the Iraq crisis, while the pound hit a near five-year high against the dollar after the head of the Bank of England suggested interest rates could go up sooner than expected.

TOKYO: The yen rallied in Asia on Monday on growing fears about the Iraq crisis, while the pound hit a near five-year high against the dollar after the head of the Bank of England suggested interest rates could go up sooner than expected.

In Tokyo the dollar bought 101.79 yen compared with 102.04 yen in US trade on Friday, while the euro slipped to 137.92 yen from 138.16 yen.

The European single currency was also at US$1.3542 from US$1.3538, while the British pound broke the US$1.70 mark for the first time since August 2009.

The jump to US$1.7012 came after two sessions of rises since Mark Carney on Thursday hinted that the BoE could soon tighten monetary policy as the economy shows signs of improving. Some analysts are speculating that rates will be hiked before the end of the year.

Investors are nervously tracking events in Iraq as Islamic militants sweep though the country, taking over key cities and moving towards Baghdad as US-trained Iraqi government forces crumble.

There are also fears Europe will be hit by gas supply disruptions after Ukraine failed to broker an 11th-hour deal with Russia in a feud that has stoked the worst East-West crisis since the Cold War.

Ukraine hosted the talks hoping to keep an energy shortage from compounding the new pro-Western leaders' problems as they confront a two-month separatist insurgency threatening the survival of their ex-Soviet state.

The geopolitical jitters pushed traders into the yen, which tends to be bought as a safe-haven currency during times of turmoil and uncertainty.

Investors will be keenly watching a meeting of the Federal Reserve's policy setting committee and fresh economic data, including US industrial production and housing starts, later in the week.

The US central bank is expected to further reduce its monthly asset-buying plan by another US$10 billion as the world's number one economy improves.

"The FOMC (Federal Open Market Committee) meeting on Wednesday will undoubtedly be the focus of the week ahead," Credit Agricole said.

The dollar was mixed against other Asia-Pacific units, rising to S$1.2504 from S$1.2484 on Friday, to 1,019.59 South Korean won from 1,017.88 won and to 43.86 Philippine pesos from 43.79 pesos.

It also strengthened to 11,817 Indonesian rupiah from 11,787.50 rupiah and to 59.99 Indian rupees from 59.47 rupees while it weakened to 32.36 Thai baht from 32.38 baht, while it was unchanged at T$30.00.

The Australian dollar fell to 94.03 US cents from 94.17 cents, while the Chinese yuan changed hands at 16.38 yen against 16.40 yen.

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