The dollar fell on Tuesday, reversing its gains from the day before, as traders awaited a Federal Reserve meeting announcement on Wednesday, while major currencies such as the euro and the Japanese yen strengthened against the greenback.
After six straight weekly declines, the dollar index was on track to fall about 3.4 percent for the month, which would be its biggest monthly fall since March 2016.
Traders are cautious ahead of a slate of events this week, including a U.S. Federal Reserve meeting announcement on Wednesday and a U.S. jobs report on Friday that will include data on nonfarm payrolls and average hourly earnings. The Fed began its meeting on Tuesday.
"We're just kind of jobbing around in wait of the Fed tomorrow," said Greg Anderson, a global head of FX strategy at BMO Capital Markets in New York.
A spike in global bond yields, with 10-year U.S. bond yields pushing well above 2.70 percent, their highest since April 2014, prompted some investors to cut some short positions and pushed the dollar higher on Monday.
However, the dollar was last down 0.10 percent against a basket of six major currencies at 89.21, having pulled up from a low of around 88.43 set last week, its weakest level since December 2014.
"When you have pullbacks and the dollar strengthens a little bit, people just wait until the pullback is over and then they add to their dollar shorts," BMO's Anderson said.
"I would not say there's any fundamental driver that's changed over the last 24 hours."
The euro gained 0.12 percent to $1.2396, still a way from a three-year high of $1.2536 touched last week.
Sterling, a currency highly correlated to risk-on sentiment, briefly fell below the $1.40 line for the first time in a week before climbing back above the level and last trading at $1.4146.
The Japanese strengthened 0.10 percent versus the greenback at 108.84 per dollar.
On Tuesday night, U.S. President Donald Trump will hold a State of the Union address. Trump said on Monday he will address his proposed immigration overhaul in his speech as well as his efforts to lower trade barriers around the world for American exports.
BMO's Anderson said he did not expect the speech to be market moving.
Treasury Secretary Steven Mnuchin gave U.S. currency bears a major boost last week with a tacit endorsement of a weak dollar. Trump later tried to row back from those comments, saying he ultimately wants the dollar to be strong.