The dollar fell against a basket of currencies on Monday as big gains in oil prices rekindled demand for the euro and commodity-sensitive currencies, soothing concerns about the effects of weak commodity prices on the global economy.
A rally in industrial metal markets led by a 20 percent surge in iron ore prices also stoked bids for riskier currencies and reduced the allure of the greenback.
The increase in oil and metal prices followed assurances from China this weekend that its economy is not heading for a hard landing.
"The market was overly bearish on the Chinese economy. We are seeing a repricing of that," said Charles St-Arnaud, currency strategist at Nomura Securities International in New York.
The greenback rose earlier on Monday on the euro's weakness and a reassessment by traders of Friday's jobs report, which showed stronger-than-forecast hiring in February but a surprise dip in average hourly earnings.
The dollar slipped on Friday as some investors focused on the disappointing wage aspect of the report. It rose earlier on Monday as the payrolls data lessened worries about a U.S. recession in the coming months.
The dollar index, which measures the greenback against a basket of six currencies, was down 0.2 percent at 97.132, erasing an earlier 0.4 percent gain.
The modest revival of the euro, Australian dollar and other commodity currencies versus the greenback will likely be short-lived as the backup in oil and metal prices is expected fade, St-Arnaud said.
The euro initially fell early Monday on bets of stimulus from the European Central Bank meeting on Thursday to support fragile euro zone growth.
"There is a lot of expectations with what the ECB would do," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York.
The ECB is expected to cut interest rates deeper into negative territory and to adjust its 1.1 trillion euro bond-purchase program, but after the bank disappointed many in markets in December, traders have been loath to bet more heavily against the single currency.
The euro edged up 0.1 percent to $1.1008 and down 0.5 percent to 124.75 .
Meanwhile, most commodity currencies wiped out early losses as oil prices moved further away from 12-year lows set in February on hopes of reduced supply in the face of soft global demand.
The was up 0.4 percent at $0.7473 while the Canadian dollar strengthened to C$1.3289.