The U.S. dollar hovered around a nearly two-week low against a basket of major currencies on Monday after the biggest fall in Shanghai shares in eight years drove demand for safer currencies, while strong German economic data bolstered the euro.
Shanghai stocks tumbled 8.5 percent, dragging European shares down more than 1 percent and the U.S. benchmark S&P 500 index to its lowest in more than two weeks. The move led traders to favor the euro as well as the safe-haven Japanese yen and Swiss franc.
"Dollar weakness against the euro and the yen is a risk-aversion story reflecting China stocks," said Richard Franulovich, senior currency strategist at Westpac in New York.
He said traders who suffered losses in stock markets probably compensated by closing out short bets against the euro, which in turn helped that currency gain against the greenback. The euro was last up 1.02 percent against the dollar at $1.1094, near a two-week high of $1.11130.