(Updates with European trading, adds comment)

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Dollar index bounces from March 2022 lows

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Euro breaks four-day rally

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US Treasuries, gold also gain on Middle East tensions

By Johann M Cherian, Amanda Cooper

LONDON, June 13 (Reuters) - The dollar rallied on

Friday, as investors rushed back into the currency in their

search for safe-haven assets, including gold, after Israel

launched widescale strikes against Iran, sparking Iranian

retaliation.

Israel said it targeted a wide range of military targets in

Iran, in response to which Iran launched a barrage of drones.

U.S. and Iranian officials were due to hold a sixth round of

talks in Oman on Sunday on Tehran's uranium enrichment

programme. Israel's ambassador to the United Nations said the

government's determination to strike Iranian targets was an

independent decision.

Initially, the Swiss franc and Japanese yen rallied, before

ceding ground to the dollar, which until recently, has always

been the ultimate safe-haven in times of geopolitical or

financial turmoil.

Against a basket of major currencies, the dollar rose by

nearly 0.6%, as losses mounted for the euro, sterling and the

Australian dollar in particular.

"The dollar is reverting to that traditional role of safe

haven, which we haven't seen for months," City Index strategist

Fiona Cincotta said.

"This is headlines driving this. And I think, obviously,

we've got the Federal Reserve interest rate decision next week,

so the boost may well be short-lived if we see escalations calm

down over the weekend," she said.

The euro broke a four-day rally to trade down 0.4% at $1.1538,

but still within sight of Thursday's near-four-year high of

$1.163225.

Against the yen, the dollar rose 0.2% to 143.76,

having touched an overnight low of 142.795 before recovering,

while against the Swiss franc, it also rose 0.2% to

0.81155 francs.

Investors also snapped up U.S. Treasury bonds, sending the yield

on the benchmark 10-year note down as much as 4.7

basis points at one point to a more-than-one-month low of 4.31%.

Gold prices jumped as much as 1.7% to $3,444 an ounce,

their strongest since early May.

DOLLAR SET FOR WEEKLY LOSS

Friday's developments created more uncertainty for investors

navigating a broad range of concerns about the outlook for

global trade and inflation.

Even with Friday's gains, the dollar index was trading close

to its lowest level since March 2022, which it hit earlier this

week, after a U.S.-China trade truce offered little clarity and

U.S. President Donald Trump said he would outline unilateral

terms of trade with other economies in the days to come.

The index is on track for a weekly decline of nearly 1%,

its biggest drop in more than three weeks, and is set for losses

against the yen, the Swiss franc and the euro.

"Geopolitical noise may temporarily distort the dollar

downtrend and temporarily weigh on risk proxies especially

heading into the weekend," said Christopher Wong, a currency

strategist at OCBC.

Two inflation reports this week showed price pressures were

contained, fuelling expectations of more aggressive interest

rate cuts by the U.S. Federal Reserve. But tariffs could filter

into prices in the coming months, analysts warned.

Following Israeli strikes, crude prices

jumped more than $5 a barrel on fears of supply disruptions in

the oil-rich region, which could also add to price pressures.

Later on Friday, investors will assess the University of

Michigan's preliminary survey out of the U.S. for a look at how

consumers have fared this month.

Decisions from the Fed, the Bank of Japan and the Bank of

England are expected next week that could offer investors more

clarity on the path ahead for interest rates.

The risk-off mood also hit cryptocurrencies on Friday.

Bitcoin eased 1.5% to $104,336, while ether prices

declined over 4.7% to $2,516.