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The United States launched its first air strike
against Iraq since American troops withdrew from the country in
2011. Fighting has also resumed in Gaza between Palestinian
militants and Israel, while the conflict between Russia and
Ukraine remained on investors' radar.
The concerns drove traders to book profits on bullish positions
in the dollar, while the euro gained after traders took profits
on short bets against the shared currency, analysts said.
The profit-taking came after the U.S. dollar index, which
measures the greenback against a basket of six major currencies,
notched its biggest monthly gain in nearly 1-1/2 years in July.
"Geopolitical issues in different parts of the world are going
much further than anyone expected," said Steven Englander,
global head of G10 foreign exchange strategy at CitiFX in New
York.
The dollar index was still on track to notch its fourth straight
weekly gain, however, in the wake of some stronger-than-expected
U.S. economic data this week.
President Obama authorized air strikes on Iraq after tens of
thousands of Christians fled Islamic State fighters who have
crucified and beheaded captives.
The dollar held losses despite a report that Russia's defense
ministry said Friday it had finished military exercises it was
conducting near the border with Ukraine.
The U.S. dollar index <.DXY> was last down 0.16 percent at
81.395, up modestly from a one-week low of 81.261 touched
earlier in the session. The euro <EUR=> was last up 0.36 percent
against the dollar at $1.3408.
The dollar was last down just 0.03 percent against the yen
<JPY=> at 102.06 yen after hitting a more than two-week low of
101.49 yen. The dollar was last down 0.4 percent against the
Swiss franc <CHF=> at 0.9053 franc.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was last up
1/32 in price to yield 2.42 percent after hitting 2.35 percent,
its lowest in 14 months.
Analysts said the dollar's losses would likely prove brief.
"These events cause risk aversion initially, but within a day or
so, the market has moved on," said Richard Franulovich, senior
currency strategist at Westpac Banking Corp. in New York, in
reference to the events fuelling the day's geopolitical worries.
He said next Wednesday's U.S. retail sales data for July would
be closely watched given the importance of consumer spending on
gross domestic product growth. Economists polled by Reuters
expect a 0.3 percent gain, up from a 0.2 percent rise in June.
(Reporting by Sam Forgione; Additional reporting by Gertrude
Chavez-Dreyfuss; Editing by W Simon and James Dalgleish)
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