* Oil prices coming off peaks lend dollar support
* Divergent euro zone-U.S. rate view still supports euro
* Swiss franc eases from record highs vs dollar (Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 25 (Reuters) - The dollar rebounded against the euro on Friday, boosted by a retreat in oil prices after Saudi Arabia stepped up crude supply, and the greenback could reclaim its status as a safe-haven currency if Middle East tensions escalate.
The correlation between lower oil prices and a higher dollar may be in place for now, but some analysts said that link could weaken. Although the dollar failed earlier this week to hold its traditional role as a safe-haven currency as the uprising in Libya stoked fears about unrest spreading to other oil producers, traders said the dollar could reclaim safe-haven status even if oil spikes anew.
In midday New York trade, the euro was down 0.4 percent on the day at $1.3754. It hit session lows at $1.3724, reversing earlier gains that had taken it to the highest level against the dollar in more than three weeks.
The euro's early session strength was helped by inflation-fighting rhetoric from European Central Bank policy makers, which added to expectations that euro zone rates will rise faster than those in the United States.
A weekly euro close above this year's highs at $1.3862, hit in early February, leaves the single currency poised for further gains toward $1.40. This level was viewed as strong resistance, with traders reporting Asian central bank offers defending an option barrier at the $1.3840-50 area.
"The fact that oil prices came off their highs was a slight benefit to the dollar," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "The oil-dollar correlation seems intact for now, but I don't know for how long."
Higher oil prices typically undermine the dollar as the United States is a major oil importer.
If the civil uprising in Libya worsens or unrest spreads to other parts of the Middle East, the dollar could revert to being a safe-haven currency even if oil spikes anew, McCarthy said.
Top oil exporter Saudi Arabia said it was willing to step in to make up for any shortages resulting from tensions in Libya, pushing oil prices lower. U.S. crude futures on Friday were down at $96.96 per barrel, coming off their highs in more than two years.
Adam Cole, global head of FX strategy, at RBC Capital Markets in London said the dollar's failure to rally in the face of rising tension in the Middle East does not reflect a change in the greenback's safe-haven status.
Risk appetite is playing "second fiddle" to interest rate expectations, Cole said.
"Rising crude price, combined with ever more ECB talk of guarding against second-round effects have led markets to price in much earlier and more aggressive ECB hikes," said Cole.
To suggest that the U.S. currency has lost its safe-haven role, he added, "overlooks the upside risks to the dollar if unrest in the Middle East continues to spread beyond a small number of hot spots and hence spills over into a deeper and more broadly-based sell-off in risky assets."
The dollar was up 0.3 percent against the Swiss franc at 0.9290 franc, after hitting a record low of 0.9229 franc on Thursday. Analysts said the franc may face some liquidation of longs, especially if oil prices stabilize.
Against a basket of currencies, the dollar was up 0.3 percent at 77.284, not far from a 3-1/2-month low of 76.881. The euro is the largest component of the dollar index.
Analysts said the euro's intraday-bias remained on the upside. Minor support was cited at $1.3704, Thursday's low. Below $1.3704, the euro's bias could switch to the downside for a slide to $1.3427, this week's low, or possibly lower.
A break past $1.3862 would mark its highest level since early November. Beyond there, resistance lies at $1.3947, the 76.4 percent retracement of a November to January slide.
The U.S. dollar fell to a three-year low versus the Canadian dollar at C$0.9797, helped by elevated oil prices and as traders took out an option barrier at C$0.9800. (Editing by Leslie Adler)