More broadly, the dollar added to recent gains against other major currencies, supported by robust US consumer spending data on Monday.

Merkel said she would not seek re-election as party chairwoman, heralding the end of a 13-year era in which she has dominated European politics.

"Currency markets considered her the Iron Lady of Europe," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

"This is certainly not positive for the euro's political backing," he said.

Merkel's weakness at home may limit her capacity to lead in the European Union at a time when the bloc is dealing with Brexit and a budget crisis in Italy, said Schamotta.

Merkel has loomed large on the European stage since 2005, helping guide the EU through the euro zone crisis and opening Germany's doors to migrants fleeing war in the Middle East in 2015 - a move that still divides the bloc and Germany.

The euro was 0.14 percent lower against the greenback.

Schamotta cautioned against reading too much into the euro's weakness on the day.

"I would not suggest that this might have a permanent impact on the euro area. She is still chancellor and there is every possibility that she moves on up to an European Council position," he said.

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.24 percent at 96.594, just shy of the 10-week high hit on Friday. The greenback rose 0.38 percent against the Japanese yen, reclaiming some ground lost last week.

The dollar has been boosted by growing volatility in capital markets spurred by concerns about corporate earnings and geopolitical uncertainty.

"For the USD to weaken, it will either have to lose its safe haven appeal or US data will have to moderate," Morgan Stanley strategists said in a note on Monday.

On Monday, data showed US consumer spending rose for a seventh straight month in September.

The Fed is expected to raise interest rates again in December.

China's offshore yuan slipped to a session low against the dollar after Bloomberg reported the US is preparing to announce by early December tariffs on all remaining Chinese imports if talks next month between presidents Donald Trump and Xi Jinping fail to ease the trade war.

The pound drifted lower on Monday as Britain's finance minister Philip Hammond laid out the prospect of an end to austerity so long as Britain agrees a Brexit deal with the European Union.