WASHINGTON (dpa-AFX) - The U.S. dollar stayed firm early on Friday, extending gains from previous session, amid heightened geopolitical tensions after the U.S. confirmed it killed Iranian Major-General Qassem Soleimani in an airstrike on Thursday.
Although the dollar pared some gains subsequently, it still stayed fairly steady as the session progressed and was off a 6-month low of 96.36 it touched earlier in the week.
The U.S. Department of Defense said the head of the elite Quds Force and Abu Mahdi Al Muhandis, a top Iraqi militia commander, were killed in the air strike on their convoy at Baghdad airport.
The department added that Soleimani was behind the recent attacks on the U.S. embassy in Baghdad and that the air strike on Thursday was aimed at deterring future Iranian attack plans.
Iranian leader Ayatollah Ali Khamenei said there would be 'revenge' for Soleimani's death, while U.S. President Donald Trump cryptically tweeted, 'Iran never won a war, but never lost a negotiation!'
Trump later claimed that he does not want to start a war with Iran but said he is 'ready and prepared to take whatever action is necessary' to protect American lives.
The dollar index, which advanced to 97.11 early on in the session, dropped to a low of 96.71 a little before noon, and edged up to 96.90 by late afternoon, gaining marginally over previous close.
Against the Euro, the dollar strengthened to 1.1159, from 1.1172, and against British Pound Sterling, it gained nearly 0.5% at 1.3075 a sterling.
The yen was notably higher at 108.11 a dollar, rising from Thursday's close of 108.56. Swiss franc was down slightly against the dollar, with the dollar-franc pair trading at 0.9721.
Against the Aussie, the dollar gained about 0.6%, strengthening to 0.6952.
In U.S. economic news, the Institute for Supply Management released a report showing U.S. manufacturing activity unexpectedly contracted at a faster rate in the month of December.
The ISM said its purchasing managers index slid to 47.2 in December from 48.1 in November, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the reading to come in at 49.0.
With the unexpected drop, the index pointed to the fastest rate of contraction in manufacturing activity since June of 2009.
According to a report from the Commerce Department, construction spending in the U.S. climbed by 0.6% to an annual rate of $1.324 trillion in November after inching up by 0.1% to an upwardly revised $1.317 trillion in October.
Economists had expected construction spending to rise by 0.3% compared to the 0.8% slump originally reported for the previous month.
The Commerce Department said spending on private construction rose by 0.4% to an annual rate of $985.5 billion in November.
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