The dollar fell against the Swiss franc on Wednesday after Iran test-fired long- and medium-range missiles, stoking worries about geopolitical tensions and sending investors towards a traditional safe haven.
"The Swiss franc tends to be bought when these types of geopolitical issues come up," said a trader for a Japanese bank, adding the dollar had moved down against other currencies, too. It fell 0.5 percent to 1.0282 Swiss francs. Iran's state media reported that Iran had test-fired nine long- and medium-range missiles, including one it has previously said could reach Israel and US bases in the region.
The tests occurred at a time of increased tension between Iran and Israel over Tehran's disputed nuclear programme, which the West fears is aimed at making bombs. Iran says its nuclear programme is only for power generation. In a sign of the dollar's broad weakness, the dollar index fell nearly 0.2 percent on the day to 72.772.
A trader for a European bank said the impact on the dollar could be short-lived unless tensions were to escalate further. "They were only launched as a test," he said, referring to the Iranian missiles. The dollar fell 0.3 percent to 107.15 yen. The euro rose 0.3 percent to $1.5713.
The Australian dollar dipped after data showing consumer confidence hit a 16-year low and demand for home mortgages suffered the biggest monthly fall in eight years, the latest signs that the economy is losing steam. "It was a bit of a surprise to see a big minus number on housing-related data," said Akira Kato, senior manager for Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department.
Kato said, however, that it was premature to expect the Australian dollar to decline sharply against the US dollar, given the worries about the US economy. Earlier, the dollar had been steady after rebounding the previous day on a slide in oil prices and after Federal Reserve Chairman Ben Bernanke assured investors the central bank would keep assisting financial markets as long as they remained frail.
Bernanke said the Fed might keep open emergency lending facilities for big Wall Street firms - launched after the collapse of Bear Stearns - longer than planned. Those remarks helped relieve market players who were rattled on Monday by a report that the top US mortgage lenders, Fannie Mae and Freddie Mac, could have to raise $75 billion of capital due to upcoming accounting rule changes.
The dollar also got a boost from the roughly $10 retreat in oil prices from last week's record high near $146, to the relief of investors worried about the corrosive impact of energy costs on corporate profits and global growth. But traders said a more sustained drop in oil and commodity prices would be needed to help improve the dollar's fortunes.