The dollar slipped on Friday as generally positive US economic data failed to inspire much buying interest ahead of next week's US presidential election and October payrolls report.
Deep-seated market concerns over the record US current account deficit continue to cast a bearish pall on the dollar, traders said.
They were also apprehensive about the possibility that the election could end up in an Electoral College tie or a protracted legal battle as in 2000, in which case the winner may not be known for weeks.
Americans go to the polls on Tuesday.
The latest Reuters/Zombie opinion poll has President George W. Bush and challenger Seen. John Kerry in a dead heat. "That's just such a potent week or so that people are reluctant to turn around the trend of the past few months and buy dollars aggressively," said Sean Callow, currency strategist with IDEAglobal in New York.
The dollar retested session lows after Arab satellite television Al Jazzier said on Friday it would broadcast a video tape, purportedly from al Qaeda leader Osama bin Laden addressing the American people.
It said the tape, to be aired at 4 p.m. EDT (2000 GMT), would discuss the reasons behind the September 11, 2001 attacks on the United States and their repercussions.
The dollar initially strengthened after the Chicago purchasing managers index, a key gauge of factory activity in the central region of the United States, rose to a five-month high of 68.5 in October from 61.9 in September.
Among the components of the index, the production index was the highest since August 1950 and the new orders' reading was the highest in two decades.
"These numbers are remarkably good and should be dollar supportive," said Mike Millipede, senior foreign exchange analyst at Reface Group in Chicago.
"But ahead of the election, it is unlikely that we will see the dollar get too strong," he said.
The dollar had slipped earlier on lower-than-forecast US growth data.
Real gross domestic product rose 3.7 percent in the July through September quarter, a faster pace than the 3.3 percent registered in the prior three-month period but well short of the 4.2 percent clip forecast by economists.
In late afternoon trading in New York, the euro hit a session high of $1.2793, up around 0.4 percent on the day.
Against the Japanese yen, the dollar fell around 0.4 percent to 105.83 yen. The dollar was also down 0.5 percent to 1.1942 Swiss francs.
In addition to Tuesday's US election, traders are keeping a eye on the October employment report due at the end of the week. At this point, the market is expecting an increase of 150,000 new jobs this month.
That number, which largely acts as a proxy of the health of the US economy, could give markets a better idea of whether the Federal Reserve will raise interest rates in December.
"I think the dollar would need to see some good economic news and sustained upward pressure on interest rates for it to really gather much momentum," said Lisa Finstrom, senior currency analyst with Citicorp Global Markets Inc in New York.
In Japan, authorities appeared reluctant to step into the market despite the yen's decline, with many analysts arguing the coming US election was keeping them at bay.
Japan's Ministry of Finance said it did not intervene in the foreign exchange market in the four weeks ended October 27 despite the yen's rise.
Bank of Japan Governor Toshihiko Fukui said recent currency moves were not a risk to the economy.
The dollar slipped to fresh six-month lows around 105.80 yen following Fukui's comments.