The dollar clawed back lost ground on Monday as investors questioned whether the greenback's slide in the wake of Friday's mixed US jobs report had been overdone. The US currency tumbled one percent against the euro, Swiss franc and Australian dollar in New York trade on Friday as the payrolls report suggested the Federal Reserve was unlikely to speed up the pace of interest rate rises.
But the greenback recovered its footing in European trade, gaining 0.3 percent to $1.3197 per euro, 0.5 percent to 105.22 yen and 0.6 percent to 1.1755 Swiss francs.
"People are still digesting Friday's data and wondering whether the short-term reaction to sell the dollar was right," said Lee Ferridge, senior proprietary trader at Rabobank.
"After all, it wasn't a bad number. It's just that the market had positioned for something even better."
Data on Friday showed the US economy generated 262,000 new jobs in February, the biggest gain in four months, but the good news was tempered by an unexpected rise in the jobless rate.
Sterling was a poor performer as a darkening technical outlook encouraged model-based traders to unwind bets on further pound strength.
The pound fell over half a percent at $1.9130, turning tail from 2005 highs against the greenback set on Friday.
"There's no specific news but models have been selling. On a quiet day, it's been enough," said a trader at a UK-based bank.
Markets were unruffled by comments from European Central Bank President Jean-Claude Trichet who said low yields in major debt markets may signal an underpricing of risk.
In a thin week for US economic releases, most attention is likely to focus on Friday's US trade data.
The dollar fell to record lows beyond $1.36 in December as markets worried that the United States' huge current account deficit would only be alleviated by further weakness in the US currency.
The greenback recovered ground in January as upbeat US economic data suggested interest rates might rise faster than the market expected, making returns on dollar deposits look more attractive.