The dollar rose across the board in Friday's U.S. session after report that 11 Iranian troops had entered Iraqi territory and raised the Iranian flag at an oilfield whose ownership is under dispute, however, dollar erased its gains on profit-taking in New York afternoon session and ended the day with modest gain.

The single currency bounced briefly to 1.4405 in European morning after the release of higher-than-expected German Ifo business climate n strength of European equities before running into offers below intra-day Asian high of 1.4412. Driven by concerns of the Middle East tensions, investors flocked into safe-haven assets and purchased usd and sold euro vs the swiss franc. Euro tumbled to a 3-month low of 1.4262 before recovering on profit-taking, price closed at 1.4335.

In the U.K., Britain's PSNCR n PS net borrowing for November were 20.32 n 14.67 billion pounds respectively, hitting record highs. However, Bank of England survey showed lending to U.K. business fell for the ninth straight month in Oct. as firms continued to pay down debt. The British pound retreated after rising to 1.6250 in European morning on short-covering. Cable then fell in tandem with euro hit an intra-day low of 1.6053 in NY before rebounding on profit-taking.

Earlier in Asia, the Bank of Japan kept interest rates steady as expected but in a surprise move, changed its definition of long-term price stability, saying it would not tolerate zero inflation or falling prices. Market expected BOJ would keep the interest rate at low level for an extended period of time and yen suffered. The pair extended its recent rally and reached an intra-day high of 90.91 in NY morning before easing in line with broad-based usd retreat in NY afternoon.

Data to be released next week include Japan trade balance, BOJ report n Canada retail sales on Monday, New Zealand current account, Australia Westpac leading economic index, Germany Gfk index, Swiss trade balance, U.K. current account, US GDP, PCE, new home sales, new home sales on Tuesday, New Zealand GDP, Eurozone industrial order, Canada GDP, US personal income, PCE core, PCE index, U. Michigan survey, new home sales on Wednesday, Japan BOJ minutes, U.S. durable goods, jobless claims on Thursday, Japan construction orders, housing starts, national CPI, unemployment rate on Friday. Wednesday will be a market holiday in Japan n Thursday will be a market holiday in Germany. Friday will be Christmas, only Japan's market will be opened amongst G7.