Dollar rises as Brussels attacks weaken European currencies

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The dollar rose on Tuesday as the euro and sterling weakened following attacks in Brussels that left at least 31 dead, weighing on investor risk sentiment and bolstering the view that Britain was more likely to vote to exit the European Union.

Sterling fell by more than 1 percent to its lowest level in a week. Analysts said the attacks on Brussels airport and a rush-hour metro train were likely to strengthen the case for those pushing for Britain to leave the EU in a June referendum.

"The attack in Brussels, on the back of terrorist attacks in Turkey over the weekend ... is bad news for the U.K., because it plays into the hands of those who want to leave, thinking that somehow if they leave they're safe," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

"Brussels makes people think about their borders and immigration."

European shares moved lower, dragged down by airline and travel stocks, souring overall sentiment towards high-yielding and riskier assets.

The yen, a favored safe haven in times of market volatility and uncertainty, also rose, touching a 12-day high against the euro, before erasing gains. The yen was up almost 1 percent at one point and hit a session high of 111.38 yen per dollar.

The dollar was last 0.35 percent higher at 112.32 yen.

"The news is having impact on sentiment," said Yujiro Goto, currency strategist at Nomura. "Safe-haven currencies are being supported on the headlines."

The Swiss franc climbed to a more than two-week high of 1.0911 franc per euro, before trading lower.

"Following the attacks in Paris last November, concerns about similar future events in Europe may have a more prolonged impact on the tourism and travel sectors, as well as a deterioration in consumer sentiment," Charalambos Pissouros, senior analyst at IronFX Global, said.

Against the dollar, the euro was lower at $1.1218, furthering its recoil from Thursday's one-month high of $1.1342, with the Brussels blasts overshadowing a German business sentiment survey and euro zone purchasing managers' surveys.

The euro's losses compounded those in the pound, helping the dollar index rise 0.39 percent to 95.66 and further extending its rebound from a five-month trough on Friday.