The euro powered back above $1.04 as activity picked up after the holiday period, putting the US currency back under pressure amid worries about a possible US-led war in Iraq.
The euro rallied to $1.0474 from $1.0426 late on Friday in New York.
The dollar is likely to remain in tight trading ranges until details on President Bush's latest stimulus package to help the US economy are unveiled today, according to analysts.
The biggest market influence remained news about the situation with Iraq, analysts said, and unless there are major surprises on the economic front, data and monetary policy decisions this week will probably not move the market much.
"There's a lot going on this week on the economic front, with the ECB (European Central Bank) and the Bank of England both meeting and US jobs data due Friday, but these calendar milestones are likely to have much less impact this week than they would usually do," a Brown Brothers Harriman analysts said.
A majority of analysts believed the dollar would have little respite until geopolitical concerns and worries over the US current account deficit abate.
"The root of dollar overvaluation is structural, not cyclical, in nature," and as a consequence, improved US economic data would not by itself reverse the dollar's downward trend, said Merrill Lynch analysts in a research note.
"Instead we would rather express our views of an improved economic climate and global reflation efforts by being bullish on commodity currencies," they added.
Meanwhile, weak European data had little impact on the single European currency, given the market's focus elsewhere.
Data from purchasing managers in the euro-zone services sector confirmed a picture of sluggish growth, as the key PMI index fell to 50.6 in December from 50.8 in November.
"The euro continues to be the innocent beneficiary of a weaker US dollar despite evidence of poor economic performance," Merrill Lynch analysts said.
They added that a key factor behind the dollar's structural down-trend is concern over the United States' ability to attract enough foreign capital to finance its current account deficit.
