The dollar held above last week's record low against the euro and four-and-a-half-year lows against the yen yesterday, winning some respite after 10 consecutive weeks of losses.
Signs that China is in no rush to let its pegged currency appreciate against the dollar gave some support to the greenback which has shed nearly nine per cent against the euro and the yen in the last two months.
Speaking on Sunday, Chinese Premier Wen Jiabao played down the likelihood of a near-term yuan revaluation and questioned why the United States had taken no action to stem the dollar's fall.
In Europe, European Central Bank President Jean-Claude Trichet renewed warnings against a stronger euro, saying the currency's recent movements were not welcome.
However, analysts said the dollar's gains yesterday were only a pause in its long-term downtrend and had been driven mainly by technical factors.
"We set a new high (in euro/dollar) Friday and the market is a bit exhausted and overdone," said Peter Fontaine, currency strategist at KBC in Brussels.
"But everybody is still very negative on the dollar."
The dollar was up 0.4 per cent on the day at 102.90 yen and 0.4 per cent up at $1.3235 per euro in European trade.
"The $1.32 area should be the first test but I don't expect anything big," said Mr Fontaine.
The US currency tumbled to a record low against the euro, at $1.3329, and multi-year lows against most major currencies on Friday after a report that China's central bank had cut back on US Treasuries in its foreign exchange reserves.
The central bank adviser quoted in the report later said he had no knowledge of central bank actions and the dollar pulled up from its lows.
But the report played on one of the market's biggest fears - that without purchases of dollar assets by central banks, the United States may find it difficult or even impossible to finance its large current account deficit.
"The comments from China have given the dollar some support against Asian currencies, but the bear trend is very much in place," said Paul Mackel, foreign exchange strategist at ABN AMRO.
"Everyone is focused on central banks. Any hint they are changing the composition of their reserves could put renewed pressure on the dollar," said Mr Mackel.
Japanese data showing a big decline in retail sales in October had little market impact. Instead, market players are keeping an eye out for signs that the Bank of Japan is preparing to intervene to cap the yen's export-damaging rise against the dollar.
Japan's vice finance minister Koichi Hosokawa repeated his warnings against the yen's recent rise, saying authorities would act on rapid moves in foreign exchange rates.
UBS analysts said intervention was a "big worry," but that the yen's gains had been mostly fuelled by speculative bets rather than investment flows into Japan, potentially limiting any further appreciation.
The Swiss franc came under pressure after the chairman of the Swiss National Bank (SNB) signalled the bank may be reluctant to raise interest rates for a third time this year next month.
"Recent foreign exchange market developments show that in highly turbulent times the Swiss franc can come under upward speculative pressure," SNB chief Jean-Pierre Roth said in a speech prepared for delivery at the 50th anniversary of the Bank of Israel in Jerusalem.