By Johann M Cherian

Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS

(Reuters) -The dollar held its ground in choppy trading on Monday, as investors monitored the fighting between Israel and Iran for signs that it could escalate into a broader regional conflict and braced for a week packed with central bank meetings.

As both Iran and Israel showed no signs of backing off from their attacks, market participants mulled the prospect that Tehran might seek to choke off the Strait of Hormuz - the world's most important gateway for oil shipping - which could raise broader economic risks from disruptions in the energy-rich Middle East.

On Monday the dollar, which until recently had always been the ultimate safe-haven in times of geopolitical or financial turmoil, held at 144.29 Japanese yen after rising nearly 0.4% earlier in the session. The euro was up 0.25% at $1.1583.

The greenback was also steady against the Swiss franc at 0.812, while an index that measures the dollar against six other currencies dipped 0.3% and was last at 97.97.

Oil prices were muted, following Friday's 7% rally to near-six month highs in the wake of Israel's preemptive strike on Iran.

Currencies that are positively correlated to risk such as the Australian dollar and the New Zealand dollar were marginally higher, while oil exporter Norway's krone firmed 0.3% to hit its highest since early 2023.

Geopolitical tensions were the latest twist for investors and central bank policymakers who have been trying to navigate economic uncertainty triggered by U.S. President Donald Trump's move to reshape the global trade order this year.

The U.S. Federal Reserve gives its latest policy decision on Wednesday.

"The dollar's role as a safe haven will surely be tested, and recent price action has been inconclusive," said Win Thin, global head of markets strategy at Brown Brothers Harriman.

"If the Fed delivers a dovish hold as we expect, the dollar is likely to resume weakening due to the worsening fundamental backdrop in the U.S."

Despite the currency's broader rise in the past few sessions, analysts were less convinced that the trend could continue until there was more clarity on the tariff front.

The dollar has lost more than 9% in value against a basket of six other currencies this year. Investors remain nervous over Trump's deadline on trade deals due in about three weeks, while agreements with major trade partners including the European Union and Japan are yet to be signed.

Investors now will look for progress in any bilateral meetings with the U.S. on the sidelines of a Group of Seven leaders meeting in Canada.