The dollar edged higher Friday as traders grew more cautious amid rising Middle East tensions, which added to worries about the eurozone debt crisis and the US fiscal cliff.
The euro fetched $1.2741 at 2200 GMT, down from $1.2778 late Thursday, and slipped to 103.60 yen from 103.69 yen.
The dollar strengthened against the Japanese currency, buying 81.31 yen compared with 81.16 yen a day earlier.
The euro managed to trim its losses Friday in late New York trade but continued to weaken against the dollar as concerns about the eurozone's festering debt crisis drove investors away from assets deemed riskier, such as the European currency.
And despite encouraging remarks by leaders of the US Congress, both Democratic and Republican, following discussions with President Barack Obama on averting the harsh tax hikes and spending cuts slated for January 1, "the fears over these negotiations continue to fuel risk aversion," said Charles St-Arnaud at Nomura.
"An agreement always takes longer" than politicians would like people to believe, he added.
Escalating border clashes between Israel and Palestinians in the Gaza Strip raised global uncertainty, reinforcing fears the world economy could be hurtling toward another crisis, said Joshua Mahony at Alpari UK.
The dollar firmed to 0.9452 Swiss francs from 0.9423 francs late Thursday.
The pound, meanwhile, picked up against the greenback, buying $1.5880 compared with $1.5859 a day earlier.
"The bullish sentiment surrounding the greenback may get carried into the following week as a growing number of Fed officials speak out against tying monetary policy to specific fundamental goals," said David Song at DailyFX.