The dollar slipped on Monday after giving up earlier gains as investors focused on renewed hostilities in the Gulf, while the yen slid following a Reuters report that Japan had no immediate plan to change state pension funds' asset allocations, Reuters reported.
The U.S. currency rose earlier in the session along with oil prices but later lost ground, with the euro up 0.15% at $1.1433. Sterling was flat at $1.339, while the Australian dollar was down 0.1% at $0.694.
U.S. and Iranian forces exchanged heavy missile and drone assaults at the weekend, with Tehran targeting U.S. facilities in states across the Gulf on Sunday and saying it had again closed the vital Strait of Hormuz shipping route.
Oil prices rose, with Brent crude futures up 3% at $78.50 a barrel.
The dollar index, which tracks the currency against six peers , rose as much as 0.3% but was last down 0.2% at 100.83.
The dollar was obviously the big winner from the war last time. But it's starting from a pretty different point this time, having strengthened quite a lot and there already having been a fairly lasting repricing of the Fed outlook," said Thomas Mathews, head of markets for Asia Pacific at Capital Economics in Wellington.
"It's not clear to me the greenback would gain as much this time if the situation continued to worsen, which I think is probably reflected in trade so far."
Fed funds futures are pricing an implied 50% probability of two or more rate hikes by the time of the U.S. central bank's December meeting, up slightly from Friday, according to the CME Group's FedWatch tool.
Inflation risks are likely to remain in focus with the release of U.S. CPI data on Tuesday, PPI gauges the following day, and Fed Chair Kevin Warsh's testimony before the House and Senate, Westpac analysts wrote in a research report
Follow the latest news on Google News
