* Geopolitical tensions undermine U.S. dollar
* Oil resumes climb as geopolitical worries grow
* Trichet comments underpin euro
(Updates prices, adds quotes, changes dateline; previous
LONDON, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, July 9 (Reuters) - 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.
Iran's state media reported that the country had test-fired
nine long- and medium-range missiles, including one which it
had previously said could 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're still within
trading ranges," said 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 United States consulate in Istanbul.
The dollar index, which tracks the greenback against a
basket of six major currencies, fell 0.2 percent on the day to
72.771 <.DXY> in early New York trading.
Rising geopolitical concerns also gave safe-haven
currencies like the Swiss franc <CHF=> 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 <JPY=>.
Analysts, however, said geopolitics could 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 <CLc1> gaining 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 United States is a
heavy energy consumer.
Oil had fallen more than $5 on Tuesday after forecasters
said 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 percent to $1.5714 <EUR=> and edged up
0.2 percent to 168.71 yen <EURJPY=R>.
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 said. See [].
"There is no mistaking the hawkish tone of his comments,"
said HSBC Bank USA in a research note.
"While there is the very realistic chance that tighter ECB
policy will weigh on growth in a manner that is unhelpful to
the euro, that sequence of events could well take some time to
play out, and interest rate dynamics could play the more
dominant and euro-supportive role for much of this summer."
Despite broad U.S. dollar weakness, the Aussie dollar
<AUD=> lost ground after a drop in consumer confidence and
following a report showing demand for home mortgages suffered
the biggest monthly fall in eight years, the latest signs the
economy is losing steam. For more see [].
The Aussie fell to a near three-week low of US$0.9477. It
last traded at US$0.9531.
(Editing by Theodore d'Afflisio)
