The dollar plunged against a broad swath of currencies on Monday as weak U.S. manufacturing data curbed expectations that the Federal Reserve will rein in its bond purchases anytime soon.
Investors pared lofty positions in the greenback after data showed output at U.S. factories declined in May for the first time in six months.
Manufacturers in China and Europe also struggled last month as demand fell, suggesting the global economy still requires support from global central banks.
"Over the last few weeks the dollar has been trading more like a growth currency than a safe haven, so today's data had people rethinking whether the Fed will taper its monthly bond purchases," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "Having said that, the dollar was long overdue for a pullback, especially with long positioning in dollar/yen so high," he said.
(Read More: US Manufacturing Shrinks; Construction Spending Up)
Positioning data on Friday showed currency speculators had continued to add bets on further dollar strength, with contracts at their highest since at least June 2008.