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

TOKYO--The yen rallied in Asia 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 (BOE) suggested interest rates could go up sooner than expected.

In Tokyo the dollar bought 101.79 yen compared with 102.04 yen in U.S. trade 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 U.S.-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.

The U.S. 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 dollar was mixed against other Asia-Pacific units, rising to SG$1.2504 from SG$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.

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

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