The US currency had edged higher after Republicans on the House-Senate negotiating committee on Friday put the finishing touches on a sweeping tax overhaul that involves large cuts in levies on corporations.
But it slid on Monday on uncertainty that the bill would indeed be pushed through, and with some doubts also creeping in over the pro-growth effect the tax reforms would have.
"Even a passage of the bill by the year's end could have a limited impact on the dollar as investors are increasingly skeptical of the sustained positive impact the rushed bill will
have on the economy," said Omer Esiner, chief market analyst at Commonwealth FX in Washington.
Year-end demand for dollars had helped push the greenback higher against the euro in recent sessions, said Alvin Tan, a strategist at Societe Generale in London, but that slowed on Monday.
Despite the dollar's latest dip, some analysts believe there is further room for it to go higher.
Economic forecasters expect lower corporate taxes to raise US growth by roughly 0.5 percent over the next year, potentially lifting the pace of interest rate increases from the two priced in by the market to closer to the three consistently estimated by Federal Reserve policymakers, said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Washington.
Against a basket of major currencies, the dollar fell 0.2 percent to 93.702. The euro benefited from the dollar's weakness, gaining 0.3 percent to $1.1781.
Top Republicans are confident the US Congress will pass the tax bill this week, with a Senate vote as early as Tuesday and President Donald Trump aiming to sign the bill by week's end.
The dollar was 0.1 percent lower against the yen at 112.54 yen following Friday's rise of 0.2 percent.
The greenback also failed to get support from a rise in US Treasury yields on Monday. The benchmark 10-year yield has been confined to a 2.34 percent to 2.42 percent range over the past week.
Bitcoin was down 1.1 percent at $18,755 on the Bitstamp exchange. It hit a record high of $19,666 on Sunday, ahead of the launch of bitcoin futures from CME Group Inc .