Volume, though, was thin overall with London and Tokyo markets closed for holidays.

Trump on Monday slammed China over its trade practices, saying the United States was losing billions on trade with China. The comments followed his weekend threat to ratchet up tariffs on $200 billion worth of imports from China, even as ongoing talks between Washington and Beijing as were set to continue this week.

On Friday, Trump had cited progress in trade talks and praised his relationship with Chinese President Xi Jinping.

"The weekend headlines were a reminder that geopolitical tape bombs continually lurk beneath the surface," said Mark McCormick, North American head of FX strategy, at TD Securities in Toronto.

He suspects that Trump's comments were "designed to accelerate decision-making in the hopes of getting a deal done."

The dollar index, which measures the U.S. currency versus a basket of six major rivals, was little changed at 97.527.

Increased trade tensions between Washington and Beijing have generally been supportive of the dollar as investors view the United States to be in better shape than its rivals to weather a trade war.

Against the Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world's biggest creditor nation, the dollar fell 0.2% to 110.88 yen. The greenback dipped to a five-week low of 110.29 earlier in the session.

"USDJPY has broken the key 110.70 level and a close below here is technical bearish for the pair," Morgan Stanley analysts said in a note.

"A risk to the trade is that trade rhetoric becomes less escalatory, generating a reversal in price action, supporting risk, and pushing USD/JPY higher," they said.

Asian currencies were largely weaker with the Chinese yuan slipping almost 1% to near its lowest levels this year, around 6.80 per dollar. Both the Mexican peso and the Turkish lira fell against the U.s. currency.

Other currencies whose fortunes are linked to the Chinese economy such as the Australian dollar and the New Zealand dollar, also declined.

Sterling, meanwhile, fell 0.6% to $1.3101 and reversed some of Friday's gains, after the opposition Labor Party accused Prime Minister Theresa May of leaking details of the compromise under discussion and jeopardizing talks.

(Reporting by Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed; Editing by Nick Zieminski)

By Saqib Iqbal Ahmed and Gertrude Chavez-Dreyfuss