The US dollar edged lower against major counterparts on Monday, as risk sentiment recovered following G-7 nations’ intervention in currency markets to weaken yen and easing concerns over nuclear crisis in Japan.

The EUR/USD pair rose to a new high of 1.4194 during the interbank trade in Asia, before settling around 1.4170.

The euro gained following reports on easing concerns over damaged Fukushima nuclear plant, where engineers were able to connect electric cable to three reactors at the plant, bringing them under control.

However, Moody’s investor services on Monday said that larger-than-expected outlays by the Japanese government towards reconstruction efforts could speed up a fiscal crisis in the nation's sovereign-debt market, despite no immediate risk to its creditworthiness.

Financing the recovery efforts with additional government borrowing would delay any return to a path of fiscal consolidation, and may bring forward a tipping point where investors in Japan's government bonds (JGBs) lose confidence in the government's ability to rein in its debt, the rating agency said.

The G-7 nations last Thursday promised that they will jointly intervene in currency markets to help Japan’s recovery from the disastrous earthquake and tsunami. Analysts said the G-7 joint intervention, its first since 2000, was mainly targeted at reducing market volatility.

However, the greenback is expected to continue its weakness against the single currency as speculation over interest rate hike in April remains intact.

UK's sterling held firm against the greenback at $1.6325, after touching a 2-week high of $1.6258 on Friday. Investors await the UK inflation data and the Bank of England (BOE) minutes later in the week.

The pound is taking centre stage this week. Wednesday's MPC minutes will have a big effect on sterling. If there is an overall hawkish tone from the MPC then cable could push above stiff resistance at 1.63 and see further gains, Reuters reported, quoting Kathleen Brooks, research director at Forex.com.

The Aussie rose 1 percent to $1.0071 against the greenback, its highest level in nearly a week, helped by improving risk appetite and steady buying by real money accounts.