The dollar rose from more than an eight-month low versus the euro as traders said the greenback's recent declines went too far, too fast even as a sustained rebound seems unlikely.

The euro fell to $1.3989 after earlier climbing as high as $1.4161, its strongest level since Jan. 26.

The dollar is likely to stay on the defensive until the Fed's two-day meeting that ends Nov. 3. However, traders said the dollar's downside may be limited because much of the impact from any Fed easing has been priced in and bearish sentiment is too strong.

The dollar was up against a basket of major currencies, with the US Dollar Index up 0.26 percent at 76.853.

Against the Japanese yen, the dollar was down 0.21 percent at 81.27.

The Australian dollar hit parity with the US dollar on Friday.

In afternoon London deals, the Aussie soared as high as 1. 003 dollars, hitting its highest level since being floated in December 1983. Moments later it pulled back to stand at 99.50 US cents.

The Australian dollar has risen in anticipation of higher interest rates, while the greenback is slumping as the Fed appears set to expand its monetary easing moves, which devalue the currency by putting more of it in circulation.

Unlike other advanced countries, Australia survived the financial crisis in rude economic health, with annual growth of 3.3 percent and unemployment at 5.1 percent, thanks largely to strong resources shipments to Asian giant China.

Global stocks slipped 0.3 percent as measured by MSCI's all-country world equity index and its emerging markets index slid 0.6 percent.

European shares closed flat, but the Nasdaq Composite Index rose 1 percent after Google Inc. reported a blowout quarter late on Thursday. More than a dozen brokerages raised their price targets on Google's stock as it surged 10.9 percent.

The Dow Industrials declined and the S&P 500 was flat as US financial stocks slid on concerns that the growing foreclosure crisis could hurt corporate profits, spread to credit markets and crimp the overall economy.

The KBW bank index dropped 1.9 percent in its third-straight decline.

At 1312 GMT, the Dow Jones Industrial Average was down 41.25 points, or 0.37 percent, at 11,053.32. The Standard & Poor's 500 Index was up 1 point, or 0.09 percent, at 1,174.81. The Nasdaq Composite Index was up 23.80 points, or 0.98 percent, at 2,459.18.

The pan-European FTSEurofirst 300 index of top shares inched up 0.1 percent to close at 1,085.59 points.

Sales at US retailers rose a stronger-than-expected 0.6 percent in September, lifted by big-ticket items, while manufacturing activity in New York state jumped in October, the New York Fed's "Empire State" business index showed.

But US inflation unexpectedly slowed in September as a 0.8 percent rise in the core Consumer Price Index, which excludes volatile food and energy prices, through the 12 months ended in September marked the smallest increase since 1961, creating a major cause of concern for Bernanke and the Fed.

Oil prices slid and gold fell 1 percent, both in volatile trading, after bullion earlier had jumped to within a few dollars of the previous day's record high.

US light sweet crude oil fell $1.28 to $81.41 a barrel.

Spot gold prices fell $9.25 to $1,371.00 an ounce.

A stronger dollar makes commodities, like oil, more expensive for buyers holding alternative currencies.