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Dollar slightly lower amid continued bets on dovish Fed

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The U.S. dollar hit its lowest against the yen in two weeks on Monday on continued expectations of a slow path of Federal Reserve rate increases this year, but was mostly flat against a basket of currencies after a confident-sounding speech from a top Fed official.

The dollar struggled to gain ground after posting its worst week in roughly two months last week, and hit a session low against the yen of 111.32 yen. Analysts said Fed Chair Janet Yellen's comments last week that the central bank should proceed "cautiously" on raising rates were still weighing on the dollar.

The dollar index, which measures the greenback against a basket of six major currencies, was last slightly lower at 94.45 after hitting a 5-1/2-month low of 94.319 last week. The euro was last flat against the dollar at $1.1395 after touching a 5-1/2 month high of $1.1437 on Friday.

The dollar index erased losses after Boston Fed President Eric Rosengren said it was "surprising" that futures markets currently imply one or zero rate hikes this year, a prediction that could prove "too pessimistic." Rosengren is typically dovish.

While the remarks helped the dollar recover, they failed to spur a rally in the greenback in the wake of Yellen's dovish remarks.

"It goes to show how the Fed rate debate remains fluid, but I think the market has attuned mostly with the Fed Chair," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, on the limited impact of Rosengren's comments.

Fed funds futures contracts on Monday suggested traders saw just a 40 percent chance of a Fed rate hike in July, according to CME Group's FedWatch program.

The dollar is "going to be mired in a range" given the aftereffects of Yellen's dovish comments from last week, said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

The dollar was last down 0.32 percent against the yen at 111.30 yen. Against the Swiss franc, the dollar was last up 0.07 percent at 0.9587 franc after touching a more than five-month low of 0.9547 franc last week.