NEW YORK (Reuters) - The euro fell against the dollar on Friday after Spain set a deficit target that defied Europe’s new fiscal pact, while oil prices retreated after touching the highest level in 3-1/2 years as fears eased of a supply disruption from Saudi Arabia.
U.S. stocks edged lower as sparse economic data gave investors little incentive to push indexes that have been range-bound the past two weeks any higher. Still, the S&P 500 and Nasdaq gained for the eighth week in the last nine.
Losses in crude oil, the euro and U.S. equities weighed on gold prices, whose 3.5 percent slide this week was the biggest so far this year. Bullion remains vulnerable to a further drop.
The euro headed toward its worst week against the dollar since mid-December after Spain set a softer 2012 deficit target than one adopted under the euro zone’s austerity drive.
The euro fell about 0.8 percent to $1.3203 and was on course for a weekly loss of nearly 2 percent.
“The new higher self-imposed Spanish debt limit calls into question the basis of the European rescue agreement with Greece and other nations,” said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.
Against the yen, the dollar rose to a nine-month high after Japanese data for January showed core consumer prices fell for a fourth consecutive month. Markets interpreted the data as suggesting the Bank of Japan will focus on monetary easing, which would weaken the yen.
The dollar was up 0.9 percent at 81.77 yen.
In commodities markets, Brent crude futures fell after surging above $128 a barrel, the highest since July 2008, in post-settlement trade on Thursday in reaction to an Iranian media report of a pipeline fire in Saudi Arabia.
Prices retreated after CNBC cited a Saudi oil official saying the report was untrue.
London’s Brent crude settled down $2.55, or nearly 2 percent, at $123.65 a barrel. U.S. crude also fell almost 2 percent to settle $2.14 lower at $106.70.
A steep rise in crude and gasoline prices could dampen consumer spending and hamper the economic recovery.
“If we have some big event in the Middle East with Iran or what have you, then obviously that could throw a monkey wrench into things in the short run,” said Doug Foreman, director of equities at Kayne Anderson Rudnick in Los Angeles.
On Wall Street the equity rally lost momentum as shares ended lower after a thinly traded session.
The Dow Jones industrial average .DJI closed down 2.73 points, or 0.02 percent, at 12,977.57. The Standard & Poor's 500 Index .SPX fell 4.46 points, or 0.32 percent, at 1,369.63. The Nasdaq Composite Index .IXIC slid 12.78 points, or 0.43 percent, to 2,976.19.
For the week, the S&P 500 advanced 0.3 percent and the Nasdaq gained 0.4 percent. The Dow ended the week just a touch lower, down 0.05 percent.
European stocks also finished little changed. The effect of this week’s injection of cheap money from the European Central Bank buoyed banking stocks and was expected to continue to underpin the market next week.
By the close, the STOXX Europe 600 banking sector index .SX7P had added 0.6 percent.
The FTSEurofirst 300 .FTEU3 index closed up 0.03 percent at 1,087.08, a day after rising 1.1 percent.
Global equities, as measured by the MSCI’s all-country world equity index .MIWD00000PUS, fell 0.4 percent and closed the week almost flat.
U.S. Treasury debt prices rose after a three-day losing streak, with long-dated government debt supported by scheduled purchases of 30-year bonds by the Federal Reserve as it attempts to stimulate lending and economic growth.
The benchmark 10-year U.S. Treasury note was up 14/32 in price to yield 1.98 percent.
Gold trimmed early losses but was unable to rebound for a second day after Wednesday’s massive sell-off. Spot gold prices fell $3.93 to $1,712.00 an ounce.
U.S. gold futures for April delivery settled down $12.40 at $1,709.80 an ounce.