By Saqib Iqbal Ahmed
NEW YORK (Reuters) - The dollar rose on Monday, spurred by relief that Hurricane Irma weakened to a tropical storm and North Korea did not conduct a nuclear test over the weekend as feared.
The dollar index, which tracks the greenback against a basket of six major currencies, was 0.66 percent higher at 91.957.
The index had hit a more than 2-1/2-year low of 91.011 on Friday as investors fretted about the short-term impact of Hurricane Irma on the U.S. economy and worried about simmering tensions between North Korea and the United States.
"It's a little bit of a relief rally I suppose," said Brad Bechtel, managing director FX at Jefferies in New York.
"We were pretty oversold going into the end of the week in the dollar and there was a lot of potential risk on the horizon," he said.
North Korea marked the anniversary of its founding without any further missile or nuclear tests. The United States and its allies had been bracing for another long-range missile launch in time for the 69th anniversary of North Korea's founding on Saturday.
Meanwhile, Irma pounded heavily populated areas of central Florida over the weekend, but gradually lost strength and was downgraded to a tropical storm.
"That provides a bit of comfort for those expecting the worst as regards the storm's impact," said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.
On Monday, investors gravitated towards riskier assets. U.S. stocks rallied and U.S. Treasury prices slipped.
"That's had a supportive influence on the dollar's value today," Osborne said.
The dollar was up 1.5 percent against the Japanese yen, on pace for its best daily percentage gain in nearly eight months.
The euro was down 0.68 percent at $1.1951 after European Central Bank board member Benoit Coeure said improved euro zone growth could offset some of the negative effects of the euro's strength but a persistent exchange rate shock could drag down inflation.
Britain's pound rose to a three-and-a-half-week high against the euro, helped by speculation that the Bank of England may sound more hawkish on interest rates this week in defense of the currency.
The Canadian dollar edged higher against its U.S. counterpart, supported by further gains in Canada's bond yields after the country's central bank surprised some investors last week by raising interest rates.
(Reporting by Saqib Iqbal Ahmed; Editing by Meredith Mazzilli and Chizu Nomiyama)