Dollar advances

The US dollar firmed on Monday with the yen at a more than six-week low as investors anticipated a response from Iran to US attacks on its nuclear sites, though some analysts said the FX reaction had been relatively muted.

Iran said on Monday the US attack on its nuclear sites had expanded the range of legitimate targets for its armed forces and called US President Donald Trump a "gambler" for joining Israel's military campaign against the Islamic Republic.

ING FX strategist Francesco Pesole said the muted response in FX markets is due in part to a structural lack of appetite for long dollar positions.

"Markets need more than what would normally be required to enter long dollar positions," he said.

 "At the same time, markets are still not willing to price in a full-blown conflict in the area."

The major moves were in the oil market, with crude prices hitting a five-month high before dipping to trade lower on the day.

The dollar firmed 1.3 percent against the yen and was last at 147.7 - its highest since May 15.

Bank of America strategists said dollar/yen can reprice higher if oil prices remain elevated, noting Japan imports almost all of its oil, more than 90 percent of which comes from the Middle East, while the US is largely energy-independent.

The euro declined 0.5 percent to $1.147, but was largely unfazed after euro area flash PMIs showed the region's economy flatlined for a second month in June.

Slightly improving UK flash PMIs failed to move the dial on sterling , which last fetched $1.3389, 0.46 percent lower against the dollar.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said the markets are in wait-and-see mode on how Iran responds, with more worries about the positive inflationary impact of the conflict than the negative economic impact.

"The currency markets will be at the mercy of comments and actions from the Iranian, Israeli and US governments," Kong said. "The risks are clearly skewed to further upside in the safe-haven currencies if the parties escalate the conflict."