The dollar was on the defensive on Monday as investors sought to cut long positions built in favour of the greenback, while the euro held gains as the focus shifted to the sustainability of a U.S. recovery from the euro zone debt woes.

The dollar index barely moved at 85.31 .DXY, holding above last week's low of 85.09 which is seen as near-term support. A fall below 85.09 would take the index to its weakest since mid-May.

A sustained move below 85 would see more losses, with initial support expected near the 55-day moving average at 84.80.

The U.S. currency hit an eight-week low against the Swiss franc and hovered near a five-week trough versus the yen after data released on Friday showed U.S. gross domestic product in the first quarter grew more slowly than expected.

While mixed data shows a U.S. rate hike is not on the horizon, the market favours the safe-haven yen, the Swiss franc with its central bank having stopped FX intervention and sterling with expectations for higher interest rates, said Mitsuru Sahara, chief manager of FX derivatives trading at Bank of Tokyo-Mitsubishi UFJ.

The dollar rose 0.3 percent to 89.43 yen JPY= but was still not far from a five-week low of 89.21 hit on Friday. It lost 1.3 percent last week, the third straight week of declines.

It got some support in Asia from expectations that Japanese importers' bids were sitting below 89.00 yen, but once trade shifts to Europe and the U.S., there was some expectation the market might try to hit options triggers below 89.00 yen.

The latest data from the Commodity Futures Trading Commission showed currency speculators trimmed bets on the greenback and went long on the yen in the week to June 22. [IMM/FX]

Sterling, which hit its highest against the dollar since early May on Friday and gained nearly 1 percent, edged down 0.1 percent to $1.5050 GBP=D4.

Against the Swiss franc, the U.S. currency slipped 0.1 percent to 1.0928 francs after falling as low as 1.0895, its weakest since May 4.

Reuters FX analyst Krishna Kumar said the 1.0890-98 area was a pivotal range after being major resistance to the dollar's advance in February and March.

Market players feel comfortable about picking up the Swiss franc as the Swiss National Bank backed off a pledge to fight excessive appreciation of the franc earlier this month.

The U.S. GDP numbers came after some weaker-than-expected housing numbers and a dovish Federal Reserve, all of which drove U.S. Treasury yields lower and prompted investors to reassess their dollar positions and the prospect of the Fed potentially holding rates lower for longer than many expected.

I have a feeling in my bones that perhaps Friday was the start of the market questioning the viability of the U.S. dollar as the safe haven, said Tom Lovell, an economist at ICAP in Sydney.

The euro EUR= inched up 0.1 percent to $1.2381, having gained nearly 0.5 percent on Friday. And while the dollar's drop was helping the euro, funding issues in the euro zone were seen likely to cap gains.

Near-term resistance is at $1.2490, the high struck on June 21, with support forming around $1.2254, Friday's low.

Against the yen, the euro EURJPY=R rose 0.3 percent to 110.68 yen.

Traders said the impact from the weekend G20 meeting on the currency market was muted, with the summit throwing up no major surprises for investors.

G20 leaders agreed to take different paths to cut budget deficits and make their banking systems safer, serving a timely reminder to investors that the global recovery would be uneven and bumpy.

Still, high-yielding currencies were supported by improved risk appetite as commodities .CRB and stocks .SPX made gains.

The Australian dollar AUD=D4 rose 0.1 percent to $0.8750, having gained nearly 1 percent on Friday. Traders said there was talk of stops lined up above $0.8780 with resistance at $0.8788, the 55-day moving average. (Additional reporting by Anirban Nag and Reuters FX analyst Krishna Kumar in Sydney and Satomi Noguchi in Tokyo, editing by Chris Gallagher)