The dollar fell on Monday after posting its biggest weekly rise this year as investors took profit and grew cautious amid news that President Donald Trump's former campaign manager faces charges of conspiracy against the United States.
The caution was underscored by a spate of U.S. economic reports due to be released this week and ahead of a meeting of the Federal Reserve's policymakers Tuesday and Wednesday.
"We didn't see the dollar drop when the (Manafort) headline came out but I think it just provides more cautious undertones to whats going on right now," said Mizuho Corporate Bank currency strategist Sireen Harajli. "That does definitely play into it even if its not the full story."
The dollar enjoyed its best week of the year last week and the risk-off environment was prompting traders to sell the greenback and take those gains, Harajli said.
The day's risk aversion lifted the Japanese , often sought in times of geopolitical uncertainty, against the greenback. The dollar was last down 0.49 percent to 113.11 yen, near a one-week low.
The euro gained 0.39 percent against the dollar, bouncing back from a three-month low touched Friday.
The dollar also was weighed down by news that Trump is likely to announce Fed Governor Jerome Powell as the next Fed chief later this week. Powell is seen as wanting interest rates to be lower than do Kevin Warsh or John Taylor, the other two names said to be in consideration.
Lower interest rates make currencies less attractive for investors to hold.
Currency markets had little reaction to U.S. personal consumption data that showed consumer spending had grown at its fastest pace since 2009.
Fridays release of third-quarter economic growth data showed the economy expanded 3.0 percent, beating forecasts. It was the first time since 2014 that the U.S. economy has experienced growth of 3 percent or more for two quarters in a row.
U.S. jobs data and Purchasing Managers' Index (PMI) data are due this week.
Despite robust recent data, expectations of more U.S. rate hikes and unwinding of excessive short bets against the greenback, economists at UBS were cautious about the dollar's outlook on concerns that a pickup in global growth would be a dollar negative story.
UBS expects a global growth spurt would mean investors look for attractive investment opportunities in all major and emerging markets, showing only a marginal interest in the slightly higher U.S. yields.