By Hideyuki Sano
TOKYO (Reuters) - The dollar on Tuesday remained shackled by the prospects of monetary easing by the Federal Reserve while the safe-haven Swiss franc and gold were supported by simmering tensions between Washington and Tehran.
The euro hit a three-month high of $1.14065 in early Asia trade. It has gained 2.0% from a two-week low of $1.1181 touched a week ago as the dollar has lost steam.
The dollar was on the defensive against the yen at 107.35 yen, a tad above Friday's five-month low of 107.045.
The U.S. currency's index against a basket of six major rivals fell to its lowest level in three months to 95.953, having lost 1.7% over the past week.
Selling in the dollar accelerated after the U.S. Federal Reserve signaled it would cut interest rates before year-end on mounting worries about the fallout from tariff wars President Donald Trump is waging against China and many other trading partners.
U.S. bond yields dropped on Monday, with money market derivatives increasing bets on a 50-basis-point rate cut next month. A 25-basis-point cut is already fully priced in.
Investors looked to whether Trump and Chinese President Xi Jinping would at least call a truce in their trade war when they are expected to meet at the G20 summit in Osaka later this week.
Trump considers his meeting with Xi at the G20 summit in Japan this week an opportunity to "maintain his engagement" and see where China is on their trade dispute, a senior U.S. official said on Monday.
The dollar's weakness was the most notable against traditional safe-haven assets, reflecting concerns about tensions between the United States and Iran.
Trump targeted Iranian Supreme Leader Ayatollah Ali Khamenei and other top Iranian officials with sanctions on Monday, taking a dramatic, unprecedented step to increase pressure on Iran.
The dollar traded at 0.9721 franc, having slipped to 0.9710 on Monday, its lowest since late September.
The Swiss currency strengthened to near two-year highs against the euro to 1.1079 per euro, within touching distance of 1.1057 hit on Thursday, its highest since July 2017.
Gold also shot up to $1,425.3 per ounce, reaching its highest levels in nearly six years.
Even the price of bitcoin held firm, staying near onea-year high above $11,000.
"Assets that can be used as an alternative means of settlement are favored, as the dollar is being shunned. Geopolitics and the Fed are two main reasons behind this," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
Elsewhere, the British pound remains dogged by Brexit concerns as eurosceptic Boris Johnson is seen as likely to win a majority of votes from Conservative party members who will decide the next leader and prime minister.
Johnson reiterated his promise to take Britain out of the European Union on Oct. 31, with or without a deal.
The pound fetched $1.2737, capped by resistance around $1.2760-65.
Against the euro, the pound was on the back foot at 89.475 pence per euro, near five-month lows of 89.74 set a week ago.