The dollar advanced on Friday, bolstered by a robust US gross domestic product report and news that only one White House official was indicted in a grand jury probe about the leak of a covert CIA agent's identity.
Vice President Dick Cheney's chief of staff, Lewis Libby, was indicted on Friday by a grand jury, charging him with perjury, obstruction of justice, and making false statements.
He resigned minutes after the indictment was handed up in a federal court in Washington, the White House said. In late trading, the euro traded lower at $1.2065, down 0.6 percent from late Thursday. The dollar rose 0.2 percent against the yen to 115.64 yen.
"The dollar rallied on the Libby news. Right now, because Libby was the only one indicted and Cheney was not named, it was bit of a relief for the markets," said Kathy Lien, chief strategist at Forex Capital Markets in New York.
Libby, who played a major role behind the scenes in building the case for the Iraq war, was accused of lying in 2003 about how and when he learned and disclosed to reporters classified information about covert operative Valerie Plame.
The US currency has been under pressure for most of the week due to political concerns. The indictment issue has weighed on the dollar all week. On Thursday, the US administration was dealt another blow when President George W. Bush's nominee for US Supreme Court Justice, Harriet Miers, withdrew herself from consideration, unsettling the currency markets further.
With the indictment limited to Libby alone, analysts warned that the Bush administration may not be out of the woods yet since the investigation has not ended.
"There is still an element of doubt on whether there could be more charges of other White House officials. For the dollar it was the best outcome with just the one indictment of Libby," said Shaun Osborne, chief currency strategist, Scotia Capital in Toronto.
The dollar earlier rallied in fairly choppy trading after a stronger-than-expected GDP report.
US third quarter GDP rose 3.8 percent, outpacing analysts' forecasts for a 3.6 percent growth, although details of the data were distorted by the effects of hurricanes Katrina and Rita.
"The GDP report was dollar-positive. With the combination of solid data for the headline and what looks like increasing price pressure, that means you are going to see US yields continuing to rise and the Fed continuing to raise rates, both supporting the dollar," said Lara Rhame, foreign exchange strategist at Credit Suisse First Boston in New York.
The report showed that a price gauge closely-watched by the Federal Reserve - personal consumption expenditures excluding food and energy - was tame. At the same time, the GDP deflator rose 3.1 percent, above economists' forecasts for a rise of 2.8 percent.
Against the Swiss franc, the dollar was trading at 1.2802 francs, up 0.5 percent. Sterling fell 0.5 percent to $1.7737.
"Technically speaking, the relative strength index (on the dollar) has reached a 5-week low of 50 percent, while the MACD (moving average convergence/divergence) indicator has started its first bearish signal since September 6," said Ashraf Laidi, chief currency analyst at MG Financial in New York.
"Although the technical picture for the dollar is beginning to recede, the fundamental picture remains kinder for the US currency on the basis of further Fed rate hikes," he added.
Earlier, a weaker-than-expected reading on the University of Michigan consumer confidence index for October had slightly negative impact on the dollar.
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