The dollar fell to a two-week low on Monday, as the easing of political tensions in Italy lifted the euro and as global trade concerns resurfaced after China warned the United States against tariffs or other protectionist measures.
"With European political drama retreating from the brink, the peak in the dollar index was likely observed at 95," said Mazen Issa, senior FX strategist, at TD Securities in New York. Lingering trade disputes will also contribute to a challenging backdrop for the US dollar in the weeks ahead, he added.
"The US administration appears uncoordinated and unprepared with a global effort - that now includes China - throwing its hat in the ring of retaliation and withdrawal of a principled agreement to buy more US goods should the US decide to go through with purported tariffs later this month," Issa said.
The official Chinese news agency Xinhua reported on Sunday that if the United States introduces trade sanctions including raising tariffs, all the economic and trade achievements negotiated by the two parties a few weeks ago will be void.
In mid-morning trading, the dollar index fell 0.4 percent to 93.850, hitting a two-week trough of 93.664.
The dollar fell on Friday despite a strong US non-farm payrolls report, suggesting the greenback has been looking stretched after gaining consistently since mid-April.
But the euro clawed back some gains as Italy took steps to form a new government and as German Chancellor Angela Merkel said over the weekend that Germany favored moves toward a European Monetary Fund.
The single currency was last up 0.5 percent at $1.1720, after rising as high as $1.1737, its highest since May 24, pulling further away from 2018 lows of $1.151 last week. The Aussie rose to US$0.7651, on track for its biggest one day-rise since August.
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