The dollar hovered near a three-month low against a basket of currencies on Monday and was seen stuck in a downtrend due to concerns that the U.S. economy's recovery was losing momentum.
The dollar has been hobbled by worries over the U.S. economy after a series of U.S. economic data in the past month undershot market expectations, and its slide has been exacerbated by some bearish signals on technical charts.
The dollar index, which measures the dollar's value against a basket of major currencies, stood at 81.550.DXY, hovering just above a three-month low of 81.459 hit on Friday.
The index was also holding just above support near 81.44, which is roughly a 50 percent retracement of its rally from its November 2009 trough to a peak hit in June.
For now, I think the overall trend of dollar weakness still remains in place, said a trader for a European bank.
The yen could get a boost with the dollar on the defensive, the trader said.
The dollar edged up 0.1 percent from late U.S. trading on Friday to 86.49 yen JPY=, having hit an eight-month low of 85.95 yen on trading platform EBS on Friday after U.S. second-quarter gross domestic product (GDP) data showed U.S. growth slowed to a 2.4 percent annual rate in the second quarter.
Dollar bears had sold the dollar against the yen on Friday after the Q2 GDP data, which came in slightly below market expectations for 2.5 percent growth. Growth in the first quarter, however, was revised up to 3.7 percent.
A drop below 84.82 yen on trading platform EBS would take the dollar to its lowest in 15 years against the yen.
With the yen hovering near last week's eight-month peak against the dollar and getting close to a 15-year peak, Japanese Finance Minister Yoshihiko Noda said on Monday that excessive currency moves are undesirable and can have a negative impact on the economy.
Market players have said they will not seriously expect Japanese authorities to intervene to stem yen strength until it rises to 15-year highs beyond 84.82 to the dollar, and that the yen's rise would also need to gain more steam and a slide in Tokyo shares would have to deepen.
The Australian dollar edged up 0.5 percent and hit a three-month high of $0.9087 AUD=D4, partly on relief that Chinese manufacturing data released on Sunday was not as weak as feared.
Sterling briefly touched a five-month high of $1.5735 GBP=D4 in early Asian trading on Monday.
The euro held steady from late U.S. trading on Friday at $1.3065 EUR=.