Dollar down on security fears but euro struggles

The dollar weakened on Monday due to market nervousness about fresh security concerns, but it trimmed some of those losses after a report showing a generally healthy US manufacturing sector.
Over the weekend, intelligence warnings of al Qaeda threats to attack the New York Stock Exchange, International Monetary Fund and World Bank prompted the United States to issue a high alert for financial institutions in New York and Washington.
That triggered a dollar sell-off in Asia and Europe but the US currency's losses were moderated after the Institute for Supply Management's manufacturing index rose to 62.0 in July from 61.1 in June, meeting market expectations.
The euro subsequently came under renewed selling pressure, particularly against the yen, which helped the dollar recoup some of its earlier losses.
"The euro didn't get as much of a boost as many people had expected from the terror warnings," said Patrick Brodie, chief dealer at Sumitomo Mitsui Banking Corp in New York.
"The market's taking these reports in its stride and looking for it (the euro) to go lower again," he said, adding the generally "solid" ISM data limited the dollar's downside.
Ashraf Laidi, chief currency analyst at MG Financial in New York, agreed that the ISM report suggested the manufacturing sector "is well within its recovery phase."
On Monday, the euro was trading well off the day's high of $1.2093, according to Reuters data, at $1.2030, marginally stronger on the day.
The dollar was weaker at 110.70 yen, down around 0.7 percent from late on Friday and kept under pressure by the euro's slide against the yen. The euro zone's single currency was trading at its session lows around 133.18 yen, off almost half a percent.
Against the Swiss franc, the dollar reduced losses to 1.2781 francs, while sterling was up around half a percent at $1.8280.
The prospect of more robust growth raised by the US manufacturing report burnishes the allure of the dollar for global investors.
"The ISM figures are net positive for the dollar, but not aggressively so because (the headline number) wasn't higher than expectations," said Peter Frank, senior currency strategist at ABN Amro in Chicago.
"But we had good gains in new orders and production and these suggest stronger US growth going forward. The report also backs up the Fed's upbeat statements on the US economy," he added.
US construction spending in June fell unexpectedly by 0.3 percent, but this had minimal market impact.
The dollar had earlier fallen against the Swiss franc, euro and yen after the warnings of possible al Qaeda attacks prompted investors to move their cash into safe-haven assets.