The dollar started the week on the back foot on Monday after soft US jobs data only solidified expectations of a fresh economic package, while the British pound eyed last-ditch trade talks between the United Kingdom and European Union.
The dollar index stood little changed at 90.783, having hit a 2 1/2-year low of 90.471 on Friday. The euro changed hands at $1.2126, having climbed on Friday to as high as $1.2177, a level last seen in April 2018.
Friday's US jobs data showed non-farm payrolls increased by 245,000 last month, the smallest gain since May, in a sign the jobs recovery is losing momentum on the third wave of coronavirus infections.
Yet traders perceived the data as putting pressure on Washington to pass a new round of stimulus to help the coronavirus-battered economy, keeping overall risk appetite intact and capping the US dollar against riskier currencies.
"There was limited reaction to the soft number. Markets are more focusing on the prospects of more fiscal stimulus," said Shinichiro Kadota, senior currency strategist at Barclays Capital.
Talks aimed at delivering a fresh infusion of coronavirus relief gathered momentum in the US Congress on Friday, as a bipartisan group of lawmakers worked to put the finishing touches on a $908 billion bill they hope to get through this week.
The spectre of fresh borrowing boosted the 10-year US Treasuries yield to an 8 1/2-month high of 0.986% on Friday, helping lift the dollar against the yen to 104.20 yen.
The offshore yuan stood at 6.5140 per dollar, just shy of its 2 1/2-year high of 6.5070 set on Friday.
Sterling traded little changed at $1.3415, stepping back from 2 1/2-year high of $1.3540 touched on Friday as investors looked to talks between Britain and the EU this week to avert a chaotic parting of ways at the end of the year.
Earlier it fell to as low as $1.3360 after weekend talks stalled on three thorny issues.
British Prime Minister Boris Johnson and European Commission President Ursula von der Leyden are due to hold a call on Monday evening in the hope that, by then, differences over fishing rights waters around the United Kingdom, fair competition and ways to solve future disputes will have narrowed.
"While it is hard to predict how the negotiations will go, I suspect sterling will be well-supported unless we have a complete breakdown in the talks," said Barclays' Kadota.