TOKYO, Oct 21 (Reuters) - The US dollar hovered near a three-week low on Wednesday as traders assessed developments in the Middle East after the conflict burnished the currency's appeal as a safe haven amid oil-driven inflation worries.
The Australian dollar reached a three-week high against the greenback. Reserve Bank of Australia Deputy Governor Andrew Hauser said at a Citi conference that the inflation outlook looked "materially worse."
The Aussie dollar rose 0.2% to $0.70155 at 0525 GMT, after
earlier touching $0.70289 for the first time since September 29.
The US dollar index, which measures the currency against six peers, was steady at 101.79 after declining 0.2% on Tuesday and dipping as low as 101.50 for the first time since October 1.
Investors have turned to the greenback amid market volatility brought about by the US-Israeli war on Iran, partly due to US energy independence.
Oil prices edged toward a five-month high as traders weighed an Iranian media report that Tehran told Pakistan's army chief there would be no talks with Washington until its demands were met. There was no official confirmation of the report.
The dollar has also been under pressure with Treasury yields sliding this month, while demand for safe-haven assets has diminished, with Wall Street posting a solid session overnight as technology earnings season got underway with SpaceX results. Japan's Nikkei and South Korea's KOSPI rallied on Wednesday.
"With equity market sentiment and the growth outlook closely tied to the performance of the major tech firms, their earnings results can have a large bearing on the USD," said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, in a client note.
Amid a "mixed" performance among traditional haven assets this year, "the USD has been the clear standout," she said. "Safe haven demand for the USD is likely to fade once the Middle East conflict ends and energy prices retreat. However, we expect the USD to trend modestly higher in coming months as foreign capital inflows into US markets increase."
The greenback was flat at 158.16 yen, though it edged up to $1.1224 per euro and $1.33735 against sterling.
Traders remained wary of the euro as France tackles widespread anti-government protests and a worsening fiscal picture.
France will reinforce police with troops and mount a huge security operation for more protests planned on Saturday, the government said on Tuesday, acknowledging failures in its response to violence last weekend.
Among central banks, the US Federal Reserve, European Central Bank and Bank of Japan will unveil policy decisions on consecutive days starting next Wednesday. Traders do not expect changes in interest rates at any of those meetings.
The Reserve Bank of New Zealand and Bank of Canada decide policy on the same day as the Fed, with traders betting on quarter-point hikes by both.
The New Zealand dollar slipped 0.2% to $0.5675 on Wednesday, while Canada's loonie was steady at C$1.4064.
(Reporting by Kevin Buckland; Editing by Christopher Cushing and Thomas Derpinghaus)
