The dollar edged down on Monday as renewed selling on oil markets drove investors into currencies often deemed less risky investments, such as the euro, Swiss franc and Japanese yen. Crude oil futures fell 3 percent after Iraq announced record-high oil production, feeding into a heavily oversupplied market.
US stock indexes opened lower, following their European counterparts, dragged down by energy stocks.
The oil price fall turned investors' focus back onto a broadly negative outlook for the world economy that has dominated since the start of 2016, amid slowing growth in No. 2 economy China and weakness in oil prices.
That has tended to benefit the euro, yen and Swiss franc at the expense of the dollar.
"The negative shock of the first couple of weeks is still pretty strong," said Vassili Serebriakov, currency strategist at BNP Paribas in New York. "The roadmap has been that the yen and the euro tend to outperform when markets feel jittery."
European Central Bank President Mario Draghi helped normalise sentiment last week when he suggested the bank could add to its stimulus program as early as March, Serebriakov added, "but I think it will take a while before markets find some sustained stability."
The dollar fell 0.2 percent against the yen to 118.54, well off last week's one-year low of 115.97. The euro rose about 0.4 percent at $1.0816. The Swiss franc rose 0.1 percent to 1.0143 francs.
The dollar has fallen more than 1.5 percent against the yen so far in January. Against the euro, the dollar has risen 0.6 percent, recovering from a nearly 2 percent drop versus the continental currency in the first two weeks of the year.
Investors' continued risk aversion this year has pushed markets heavily out of the dollar and into the yen.