The dollar was broadly flat on Monday after paring early gains on news growth in the U.S. manufacturing sector last month was slower than financial markets had anticipated.

The Institute for Supply Management said its manufacturing activity index in March slipped to 55.2 from 56.7 in February, falling short of the expected rise to 57.9.

That helped erase most of the dollar's earlier gains which had been fueled by its rise against the yen as Japanese investors started their new financial year by buying higher-yielding foreign assets.

The dollar's subsequent reversal was most noticeable against the euro, where, for a time, it was actually weaker on the day.

The ISM seemed to get the trend rolling and the market now seems willing to sell dollars, said one trader.

Yields on 10-year U.S. Treasury notes, which had earlier on Monday risen to their highest since June 2002 at 4.905 percent , eased back to their session lows and helped take the steam out of the dollar's rally.

Around 12:30 p.m. EDT (1630 GMT) the euro was essentially flat on the day at $1.2125, and sterling was also flat at $1.7387.

The dollar was up 0.1 percent against the yen at 117.80 yen , a full yen off the three-week high of 118.80 yen reached earlier in the global session.

The dollar was at 1.3045 Swiss francs.

Analysts said market participants were likely hesitant to take big positions ahead of a policy meeting of the European Central Bank and the March U.S. payrolls report due later in the week.

The topside in euro is likely contained in front of $1.2140, making euro a sell on a rally until we get closer to Thursday/Friday when the market will begin to position itself for U.S. non-farm payrolls, said Matt Kassel, head of foreign exchange strategy with IDEAGlobal.

Earlier on Monday, the yen was the biggest mover, slipping to that three-week low against the dollar and a two-month low against the euro.

Japan's closely watched tankan survey showed business confidence among the country's big manufacturers slipped unexpectedly in the three months to March, its first decline in four quarters, triggering the yen's move lower.

And, with the latest monthly U.S. employment report on Friday looming, expectations of more solid job creation are lending the dollar broader support and pushing U.S. bond yields and interest rates higher.

I wouldn't want to be short of dollars going into payrolls on Friday, said David Mozina, head of New York currency strategy at Lehman Brothers. I would be positioned for more dollar strength for the rest of the week.

Still, Mozina said the euro should remain generally rangebound, with $1.19-$1.22 range seen holding for a while yet.