* Euro falls after Italy cuts 2014 growth outlook
* Norwegian crown jumps over half a percent
* Currency traders wary ahead of weekend market break (Adds late prices, quotes)
By Michael Connor
NEW YORK, July 18 (Reuters) - The euro slipped below the psychologically significant $1.35 level on Friday for the first time since February as the dollar gained broadly amid geopolitical tensions aggravated by the downing of a Malaysian airliner in Ukraine.
The euro, shared by 18 countries, has been declining on shaky economic performance, including reports on Friday of weakening consumer confidence in Belgium, and speculation that U.S. policymakers may lift interest rates sooner than markets have expected.
The euro dipped on Friday to $1.3492 shortly after the Bank of Italy cut its economic outlook, according to Shaun Osborne, currency strategist at TD Securities. It recovered later and stayed above $1.35.
In reducing to 0.2 percent its 2014 growth forecast for Italy, the bank warned that there was significant uncertainty about the outlook for the euro zone’s third-largest economy.
“Pillars supporting the euro dwindled Friday,” Western Union Business Solutions analyst Joe Manimbo said.
The region’s current account balance was reduced by more than half to a surplus of 8.9 billion euros in May from a revised 18.8 billion euros in April.
Late on Friday, the euro traded a notch higher at $1.3527 for a gain of 0.01 percent.
“The euro has been in a range with $1.35 as a bottom,” Osborne said. “The euro will probably trend lower now.”
The dollar was up against the yen, with the dollar trading ahead 0.2 percent at 101.35 yen. Sterling was off 0.07 percent against the dollar at $1.7086
An index that measures the dollar against a basket of six other leading currencies was up 0.02 percent at 80.518.
Russia’s rouble, which tumbled about 2 percent against the dollar on Thursday, was up about 0.35 percent to 35.14 to the dollar.
Currency traders were cautious, shifting away from riskier holdings as events played out in Ukraine, according to Lane Newman, director of foreign exchange at ING Capital Markets.
“You will see a continuation of the risk-off move,” Newman said. “I don’t think many people want to go into the weekend with risk on.”
Oil producer Norway’s crown jumped, boosted by concerns about Europe’s energy supply as tensions between Russia and the West over Ukraine rose.
The crown rose just over half a percent to trade at 8.3520 crowns per euro.
Valentin Marinov, head of European currency strategy at Citigroup in London, said worries over relations with Russia were outweighing the prospect of another cut in Norwegian interest rates next year.
The Norwegian central bank’s shift in June to a looser approach to monetary policy had sent the crown down over 3 percent against the euro in the month to Thursday. (Reporting by Michael Connor; Additional reporting by Jemima Kelly and Patrick Graham in London; Editing by James Dalgleish and Chris Reese)