The dollar dropped from a seven-year high against the and a two-year peak versus the euro on Monday, as investors consolidated gains made following a strong U.S. jobs report that is expected to trigger an interest rate increase next year.
The greenback's outlook remained upbeat despite Monday's fall. Investors were already looking ahead to the December monetary policy meeting of the U.S. Federal Reserve next week, watching for a change in the statement's language to a more hawkish tone.
The dollar posted its largest one-day loss against the yen since mid-October, falling after four straight days of gains. On the year, however, the dollar was still up 14 percent.
The U.S. currency's losses were in line with the drop in Treasury debt yields and stocks. The benchmark U.S. 10-year note yield was last at 2.24 percent, down from 2.31 percent last Friday.
Earlier in the session, the dollar soared to a fresh two-year high against the euro, a seven-year high versus the yen and touched a five-year peak versus a currency basket. It also rose to its highest in 15 months versus the pound.
The euro stumbled after Ewald Nowotny, the Austrian central bank chief, said government bond buying could be valuable in addressing the ``massive'' weakening of the euro zone economy.
The euro fell to a low of $1.2247 after Nowotny's comments, but was last up 0.4 percent at $1.2332.
The dollar surged to 121.84 yen, before falling 0.8 percent to 120.52 yen. Japan's national election on Dec. 14 is seen as likely to give a boost to Prime Minister Shinzo Abe and reflationary policies that should further weaken the yen.
The dollar index climbed as high as 89.550, its highest since March 2009. The index was last at 89.047, down 0.3 percent.