The US dollar fell on Friday, pushing lower initially on news from Iran that it plans to pull its foreign exchange reserves from European banks, but extending the move late in the day amid rising oil prices and a sharp drop in US stocks.
Still, most analysts said that the US dollar remains confined in the middle of a tight range trade. Trading has been choppy, and many speculative investors are getting frustrated waiting for the dollar to break the ranges.
The situation has been typified by the tight confines in which the euro has traded roughly between US$1.20 and US$1.22 since the beginning the month.
On Friday, traders made attempts at both sides of that range, with the euro trading as low as US$1.2140 overnight, and as high as US$1.2141 late in the session, according to EBS.
The US dollar's push lower in the New York afternoon was triggered by a rout in US stocks and surge in oil prices. In late trading, the Dow Jones Industrial Average was down more than 210 points, single-handedly wiping out the gains it had etched since the beginning of the year. The front-month crude oil contract, meanwhile, pushed back above US$68 a barrel.
Among the biggest gainers versus the dollar on Friday was the pound. The move started after the UK reported stronger-than-expected retail sales for last month. Some suggested the data might help dissuade the Bank of England from cutting interest rates when it meets next month.
The dollar also fell against the Swiss franc, which was helped by escalating tensions over Iran's nuclear program. Iran's announcement added to risk aversion and pushed the Swiss currency broadly higher, analysts said.
Iran's central bank said on Friday that it is moving its foreign exchange reserves out of European banks as a protection against any possible UN sanctions over its nuclear program. Iran central bank Governor Ebrahim Sheibani said that Iran began withdrawing its foreign exchange reserves from European banks and transferring them to an undisclosed location, the semiofficial Iranian Students News Agency reported.
In late New York trading, the euro was at US$1.2137, up from US$1.2097 late on Thursday.
The US dollar was at 1.2760 Swiss francs from SF1.2840 and at ¥115.26, down from ¥115.43. The pound climbed to US$1.7710 from US$1.7585. The euro was at ¥139.92 from ¥139.63.
As often happens, rising oil prices also hit the yen, capping its gains because the market has traditionally perceived Japan to be most vulnerable to higher energy costs. US stocks, however, were also a victim of rising crude.
"Oil prices have continued to move higher and equities have apparently taken it badly," said Daniel Katzive, foreign exchange strategist at UBS in Stamford, Connecticut.
Katzive said the over-arching theme was that rising oil prices, falling stocks and heightened global political tensions were increasing the attraction of what he called the "safety" currencies, in particular the euro and the Swiss franc.