The dollar index, which measures the greenback against six major peers, decreased 0.50 percent to 104.5659 in late trading.
The decline came in anticipation of this week's crucial U.S. inflation reading. Traders were mostly positioning for the U.S. consumer price data (CPI) on Wednesday, given its potential influence on whether the Federal Reserve may put rates on hold.
Meanwhile, Bank of Japan Governor Kazuo Ueda said the central bank could end its negative interest rate policy when achievement of its 2 percent inflation target is in sight, the Yomiuri newspaper reported on Saturday, signalling possible interest rate hikes.
"Once we're convinced Japan will see sustained rises in inflation accompanied by wage growth, there are various options we can take," Ueda was quoted as saying.
The Japanese yen strengthened sharply against the dollar on Monday. "Comments from the Bank of Japan's governor on rates sparked a risk on rally across all foreign currencies, putting pressure on the dollar. That provided a small tailwind for gold," said Phillip Streible, chief market strategist at Blue Line Futures.
The U.S. dollar bought 146.4880 Japanese yen on Monday, lower than 147.8240 Japanese yen in the previous session.
In late New York trading, the euro was up to 1.0745 U.S. dollars from 1.0698 dollars in the previous session, and the British pound rose to 1.2509 U.S. dollars from 1.2453 dollars.
The U.S. dollar was down to 0.8909 Swiss francs from 0.8933 Swiss francs, and it decreased to 1.3581 Canadian dollars from 1.3643 Canadian dollars. The U.S. dollar fell to 11.0756 Swedish krona from 11.1251 Swedish krona.
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