High-level talks in Beijing this week are a leading focus for investors, many of whom see little prospect for a trade deal and instead expect an extension of the March 1 deadline for deciding whether to increase tariffs. On "the trade process, and the hope that China will buy more US goods, we might see some headlines supportive of a warming in trade talks. But there are also the intellectual property and tech transfer issues and we have not seen any progress on that front and I'm not sure we will this week," said Juan Prada, currency strategist at Barclays in New York.
The United States is expected to keep pressing China on longstanding demands that it reform how it treats US companies' intellectual property in order to seal a trade deal that could prevent tariffs from rising on Chinese imports. Monday morning's move in the dollar reverberated across currency markets, driving the euro to its lowest since Dec. 14 at $1.127. The dollar strengthened to 110.45 Japanese yen and to $1.286 against the British pound.
Emerging market and China-sensitive currencies such as the Australian dollar are most likely to be affected by the trade news.
"The market was positioned in a more bearish way with respect to the dollar, so we had stronger emerging markets in the past month.
This is a retracement of what we have seen from that," said Prada.
The dollar index, a gauge of its value versus six major peers, was 0.44 percent higher at 97.067.
China markets reopened on Monday morning after a one-week holiday break, with the dollar last 0.71 percent higher versus the yuan at 6.791.