* Egyptian civil unrest prompts safe-haven buying
* Yen recovers after fall on demand from Japan exporters
* Emerging market currencies down sharply versus dollar
(Adds quotes, byline, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 28 (Reuters) - The U.S. dollar and Swiss
franc rallied on Friday, with more gains seen likely, as
tensions in Egypt raised concerns about stability in the Middle
East and Africa, increasing investors demand for safer havens
and prompting them to sell riskier assets.
Emerging market currencies sold off led by the Turkish lira
<TRY=> and the Israeli shekel <ILS=> as news reports showed
dozens of people were wounded after police and demonstrators
fought in the streets of Cairo in protests against President
Hosni Mubarak's three-decade rule. For more see
[].
Oil <CLc1> likewise surged on the news, rising 4.4 percent
to $89.38 per barrel as investors loaded up on the commodity on
fear prices may continue spiking from current levels. Spot gold
<XAU=> was up 2.0 percent at $1,337.50 per ounce as investors
sought protection from political risk.
"This could really encompass the region. Egypt is really
the pivot point in the entire Arab world and has implications
for things like the price of oil," said Dan Dorrow, head of
research at FX advisory and execution firm Faros Trading in
Stamford, Connecticut.
"If Monday looks a lot like today, then the political risk
premium will swamp any kind of of central bank and economic
fundamentals and we could see more safe-haven moves to the
Swiss franc."
In early afternoon trading, the euro <EUR=EBS> fell 0.9
percent to $1.3603, having fallen as low as $1.3584 on
electronic trading platform EBS, just shy of $1.3570, the 50
percent retracement of its decline from November to January.
As the euro's recent rally lost momentum, Goldman Sachs
said in a research note on Friday that it closed its long
euro/dollar position, with a gain of about 2.7 percent.
Goldman's chief FX strategist Thomas Stolper, however, said
in an email the bank remains constructive on the euro and
expects it to hit $1.40 in three months, $1.45 in six months,
and $1.50 in one year. For more see [].
The euro fell 1.2 percent against the Swiss franc to 1.2824
francs <EURCHF=EBS> while the dollar dropped 0.3 percent versus
the franc to 0.9419 <CHF=EBS>.
In the emerging market world, the dollar rose to a
four-month high against the Israeli shekel, up 1.7 percent at
3.7090. Jitters spread over to the Turkish lira, which fell to
a 7-month low against the greenback. Early afternoon, the
dollar surged 2.3 percent against the Turkish lira to 1.6132.
The cost of insuring Middle East and North African debt
against default rose sharply on Friday <0#EGCDSCTRYE=R> as
investors worried about political stability in the region.
[]
Fitch Ratings revised the rating outlook on Egypt to
negative from stable. []
This month a popular revolt forced Tunisia's leader to flee
the country [] and in Saudi Arabia, authorities
detained dozens of demonstrators on Friday in Jeddah who had
gathered to protest poor infrastructure after deadly floods
swept through Saudi Arabia's second-biggest city.
[]
Apart from geopolitical tensions, the dollar also got a
boost from a report on U.S. gross domestic product
[] [], while the yen recovered from
Thursday's sell-off, though investors were still cautious on
what a recent downgrade of Japanese long-term debt may mean for
other large developed-economy debtors.
The yen gained as demand from Japanese exporters and
speculators helped the currency to recoup some losses from a
broad sell-off triggered the previous day by a cut to the
country's credit rating.
The dollar <JPY=EBS> lost 0.9 percent on the day to 82.17
yen on electronic trading platform EBS, pulling back from a
rally to 83.22 yen on Thursday. Traders said a triggering of
stop-loss orders around 82.50 yen led the dollar lower.
But analysts said the Standard and Poor's downgrade
highlighted Japan's fiscal problems and could still hurt the
yen.
(Additional reporting by Nick Olivari; Editing by James
Dalgleish)
