The dollar fell from six-week highs against the euro on Monday amid speculation last week's rally on the back of robust U.S. employment data was overdone.
The dollar also fell against the yen as dealers awaited a possible Bank of Japan rate rise next week.
The U.S. currency also came under pressure earlier after news of an apparent gas leak that permeated large parts of Manhattan, prompting the evacuation of a number of buildings.
While the dollar eased back from the day's highs, few saw this dip as the start of a renewed downtrend, especially in light of last week's strong December jobs data that cut the chances the Federal Reserve will loosen monetary policy any time soon.
"After last week's gains we were bound for a pause," said Greg Salvaggio, a currency trader at Tempus Consulting in Washington, D.C. "In the absence of today of further data supporting the dollar, investors may also consider this an opportunity to buy cheaper euros."
The euro was , near a fresh six-week low of $1.2973 hit earlier in the day, according to Reuters data.
Against the yen, the dollar was down slightly as investors looked to next week's Bank of Japan policy meeting at which many expect the bank will raise interest rates.
But many viewed a BOJ rate hike as providing just a temporary boost to the yen, which underperformed against all the major currencies in 2006.
Even with a move up in Japan's benchmark rates to 0.5% from 0.25%, the yen would still be easily the lowest-yielding currency within the Group of 10 richest nations, with the euro zone at 3.5% and United States at 5.25%.
The Swiss franc pared losses, leaving the dollar , down from a session high of 1.2412, while sterling was up .