LONDON: The euro slipped towards a two-week low against the dollar on Tuesday as swirling tensions between the United States and North Korea sapped broad demand and prompted investors to take profits after recent strong gains.
"The euro has become more correlated to risk in recent weeks and sentiment is still a bit cautious though the euro upside trend is likely to remain intact over the longer term," said Manuel Oliveri, an FX strategist at Credit Agricole in London.
The single currency slipped 0.3 percent to $1.1723 and was holding just above a July 28 low of $1.1688. It is still the best performing G10 currency so far this year with gains of more than 11 percent against the dollar.
While European stocks have seen robust inflows in the wake of the French elections, their performance have lagged their US rivals since mid June.
Against the Swiss franc, it fared slightly better and was broadly flat on the day at 1.1319 francs per euro.
In recent weeks, the franc has been a particular favorite to execute a euro-bullish view against as Switzerland's currency still remains one of the most overvalued currencies on a trade-weighted basis and its central bank has struck an increasingly dovish note in recent weeks.
The dollar index was trading 0.2 percent up at 93.73. It hit a 15-month low of 92.548 on August 2.
"The markets are looking for direction after Wednesday's sharp moves and geopolitical concerns will dominate investor mindsets in the coming days," said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
The Swiss franc and Japanese yen had notched up impressive gains against the dollar on Wednesday after US President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.
That prompted North Korea to say it was considering firing missiles near Guam, a US Pacific island territory.
The Swiss franc and Japanese yen are often sought in times of geopolitical tension or global financial stress, partly because both countries have big current account surpluses.
Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.
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