The U.S. dollar hit its lowest level against a basket of major currencies in 10 months on Monday and the Australian dollar hit a more than two-year high on strong Chinese economic data and doubts that the Federal Reserve would raise interest rates again this year.
China's second-quarter gross domestic product topped forecasts with a rise of 6.9 percent on the year, while retail sales and industrial output from the world's second-largest economy were both strong.
The data boosted the Australian dollar given the country's trade relationship with China, analysts said. The Aussie shot to a more than two-year high of $0.7840, with bulls targeting the 200-week moving average around $0.8018, but was last down slightly against the dollar at $0.7819.
The dollar index, which measures the greenback against a basket of six major rivals, touched its lowest since last September of 95.018. While it was last mostly flat on the day, it was not far from that 10-month trough at 95.15.
Against the Mexican peso, the dollar hit 17.5340 pesos , putting it near Friday's more than one-year low of 17.530.
"The better-than-expected China data has been supportive for emerging markets" and the Australian dollar, said Sireen Harajli, FX strategist at Mizuho in New York.
Expectations for another Fed rate hike this year have been pared to less than a 50-percent probability after the latest U.S. inflation print on Friday.
With no top-tier data this week, markets have plenty of time to mull the repeated disappointment on prices, which has cast a question mark over the Fed's confidence that inflation would soon rebound.
"The markets are not convinced the Fed is going to be tightening rates anytime soon," said Vassili Serebriakov, FX strategist at Credit Agricole in New York. "In that kind of an environment, the dollar is struggling."
The euro was nearly flat against the dollar at $1.1476, while the recovered from Friday's nearly two-week low against the yen of 112.24 yen to last trade 0.02 percent higher against the Japanese currency at 112.60 yen.