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The dollar index against a basket of six major currencies was
0.1 percent lower at 93.44 having climbed 0.75 percent on
Friday. That was its biggest single-day rise of 2017 and pulled
it away from 92.548, its lowest level since May 2016 that it
marked on Wednesday.
The greenback hit that trough after weak U.S. indicators added
to uncertainty about Federal Reserve ambitions to start
shrinking its $4.2 trillion bond portfolio and the pace of rate
hikes amid political ructions in Washington.
But strong employment data on Friday helped the dollar snap out
of its downturn.
U.S. producer prices for July due on Thursday and consumer price
index figures on Friday should confirm whether the labor market
strength is spilling over into inflation.
"The number one question for bond markets right now is whether
missing U.S. inflation over the past quarter has been transitory
or transitional," said Viraj Patel, an FX strategist at ING in
London.
The euro rose against the dollar to $1.17865 on Monday after
falling more than 0.7 percent on Friday.
Morgan Stanley strategists said they expect the common currency
- which hit a 2-1/2-year high of 1.19105 last week - to dip to
around 1.1650/1.1700 before resuming its upward march to 1.20 in
coming days.
(Reporting by Saikat Chatterjee; editing by John Stonestreet)
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