London, March 24 (Bloomberg) -- The British pound rose against the dollar and fell against the euro amid concern U.S. and U.K. forces are facing stiffer resistance than anticipated in their effort to oust Iraqi President Saddam Hussein. Coalition forces advancing on the Iraqi capital Baghdad met resistance in cities in the south in what the U.S. military said was the ``toughest day'' of the war. Last week, the dollar rose to a 3 1/2-month high against the pound on optimism the conflict would be resolved quickly. The dollar drop ``reflects concerns in the market about what's going on in Iraq,'' said Valerie Plagnol, an economist at CIC Capital Markets in Paris. The pound gained to $1.5682 at 6:55 a.m. in London compared with $1.5633 late Friday. Last Wednesday, the pound dropped to $1.5539, the lowest since Dec. 2. The U.K. currency weakened to 67.72 pence per euro from 67.29.
Signs of a lengthier conflict tend to dim demand for dollars, boosting other currencies such as the euro, analysts said. A war is seen as negative for U.S. business and consumer confidence, while the country will also have to shoulder most of the costs of the conflict. The conflict tends to weigh on the pound against the euro because the U.K.'s close military alliance with the U.S. makes it less of a so-called haven investment. Yesterday the fiercest fighting took place at Nasiriyah, 185 miles (298 kilometers) southeast of Baghdad, said U.S. Army Lieutenant General John Abizaid, deputy commander of the coalition forces based in Doha, Qatar. ``It's the toughest day of resistance that we've had thus far,'' he said.//www.quote.bloomberg.com