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U.S. Dollar edges lower as geopolitical tensions weigh

NEW YORK, July 9 - The U.S. dollar weakened on Wednesday, as oil prices rebounded and geopolitical tensions resurfaced with news Iran test-fired missiles and unknown gunmen attacked the U.S. consulate in Turkey.

Dollar edges lower as geopolitical tensions weigh Iran's state media reported that the country had test-fired nine long- and medium-range missiles, including one which it had lastly told can reach Israel and U.S. bases in the region.

"Geopolitical tensions are slightly weighing on the dollar, although, we haven't seen such big moves and we are still within trading ranges," told David Powell, a currency strategist at Bank of America in New York.

Tensions in the Middle East were further exacerbated after three policemen and three gunmen were killed in an attack on the U.S. consulate in Istanbul.

The dollar index, which tracks the greenback versus a basket of six major currencies, fell 0.2% on the day to 72.771% in early New York trading.

Rising geopolitical concerns also gave safe-haven currencies like the Swiss franc a bid tone. The dollar fell 0.1 percent to 1.0324 Swiss francs and versus the Japanese unit, it was slightly down at 107.37 yen.

Analysts, however, told geopolitics can soon take a back seat once the macroeconomic news-flow picks up after a lack of first-tier economic releases from U.S. or euro zone on Wednesday.

OIL REBOUNDS

Oil resumed its climb in the wake of Iran's missile test with U.S. crude collecting nearly $2 to above $137 a barrel, further adding to the dollar's bearish tone. Higher oil prices tend to hurt the dollar because the U.S. is a heavy energy consumer.

Dollar edges lower as geopolitical tensions weigh Oil had fallen more than $5 on Wednesday after forecasters told an Atlantic hurricane would steer clear of offshore oil platforms but it remained not far off its all-time high of $145.85.

Another mild dollar negative was the fact that Group of Eight leaders did not speak out against the U.S. currency's weakness in the communique ending their three-day meeting.

The euro gained 0.3% to $1.5714 and edged up 0.2% to 168.71 yen.

Comments on Wednesday from European Central Bank President Jean-Claude Trichet justifying the bank's rate increase last week and reiterating its inflation focus also underpinned the euro, analysts told.