Iran saber-rattling sends dollar tumbling broadly

By Lucia Mutikani

NEW YORK (Reuters) - The dollar fell on Wednesday as news that Iran test-fired nine missiles halted oil's steep drop and unsettled Wall Street stocks, with investors concerned about the impact of soaring energy prices on the fragile economy.

An apparent attack on the United States consulate in Istanbul, Turkey also added to negative global sentiment toward the greenback and caused investors to seek out safe-haven currencies such as the Japanese yen and Swiss franc, analysts said.

"It's Iran and Turkey we should be blaming today (for the dollar's fall)," said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington.

"What we have seen happen today is the reversal of oil prices and a little bit of uncertainty re-emerging in equity markets, causing investors who were starting to get a little excited about the dollar again to jump back on the euro," he added.

Pressure on the U.S. currency was also exerted by lingering fears of more credit-related write-downs at some financial institutions.

Oil recovered some of Tuesday's sharp drop with U.S. crude gaining nearly $2 to rise above $138 a barrel, before settling near flat at $136.05 a barrel. Higher oil prices tend to hurt the dollar because the United States is a heavy energy importer.

Iran said it had test-fired missiles that could reach Israel and U.S. bases in the region, and warned it was ready to retaliate for any attack over its disputed nuclear projects.

The New York Board of Trade's dollar index, which tracks the dollar's performance against six currencies, fell to a session low of 72.574 .DXY, down 0.5 percent while the euro rose 0.4 percent to $1.5734.