Doubts, however, persisted over the U.S. labor market and whether Friday's payrolls data would rebound from March's slowdown and be strong enough to support bets the Federal Reserve might raise interest rates by year-end - which had been the factor behind the recent dollar surge.
"The nonfarm payrolls report is the big show this week. The dollar should tread water or soften going into Friday's number," said Jonathan Lewis, chief investment officer at Samson Capital Advisors in New York.
Economists polled by Reuters forecast that U.S. employers likely added 225,000 workers in April, rebounding from an increase of 126,000 in March, the smallest monthly gain since December 2013.
Data last Friday showed speculators had pared back bets on the dollar, pushing the currency's net long positions to their lowest in 4-1/2 months.
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"We need to see a couple of weeks of good data from the U.S. for the dollar to pick up again and get back on track," said Sonja Marten, chief FX strategist at DZ Bank in Frankfurt. "If that doesn't materialize, then all bets are off."
The euro was down 0.52 percent against the greenback at $1.1143 following a report that showed German factory activity cooled in April from an 11-month high in March. It reached a two-month high of $1.1290 hit last week.
The dollar was down slightly against the yen at 120.13 yen.
Sterling slipped 0.14 percent to $1.5185 ahead of tight British parliamentary elections on Thursday, which may end with no party winning an absolute majority.
On the other hand, the dollar weakened 0.34 percent against the Swedish crown at 8.3725 crowns after stronger-than-expected Swedish manufacturing figures stoked bets a stronger crown would pressure Sweden's central bank to ease policy.