Tokyo: The dollar retreated against a basket of currencies on Friday as fear that Russia may cut oil supplies to Western Europe spurred oil prices and nudged down the greenback.
The UK’s Daily Telegraph reported that Russia may restrict shipments in the coming days in response to the European Union’s threat of sanctions over its military action in Georgia.
Traders said the report was one reason oil was bought and the dollar was sold.
The dollar gave up some gains made on Thursday on data showing the US economy grew at a faster pace during the second quarter than initially thought.
The dollar index dipped 0.2% to 76.952. Oil rose more than $1 to $116.73.
US markets will be closed on Monday for the Labour Day holiday and this also encouraged market participants to sell the dollar.
“A three-day weekend is coming up and some players are opting to shed long positions on the dollar with geopolitical risks in the air,” said Joseph Kraft, head of Japan capital markets at Dresdner Kleinwort.
The dollar eased 0.4% to 109.07 yen. The euro climbed 0.3% to $1.4738.
However, the greenback is still poised to gain 5.5% against the euro this month. This would be the biggest gain against the euro since the single currency was launched in 1999.
Since late July, the dollar has benefited from growing signs that economic weakness has spread beyond the United States.
US gross domestic product grew at a 3.3% annual rate in the second quarter compared with the initial estimate of 1.9%, the government said on Thursday.
In contrast, UK data showed that British house prices posted their biggest annual fall for 17 years while retail sales saw the steepest drop since records began a quarter of a century ago.
The pound hit a two-year low of $1.8242 on the discouraging numbers before crawling back to $1.8311, a gain of 0.2% from late US trading.