The U.S. dollar saw a slight decline against a basket of currencies, with the dollar index down 0.07% at 105.01
Despite the recent dip, the dollar had a nine-week winning streak, the longest in nearly a decade, due to resilient U.S. economic growth
Traders were awaiting multiple central bank interest rate decisions, including one by the Federal Reserve scheduled for Wednesday
The euro gained ground against the dollar following reports that the European Central Bank (ECB) may discuss reducing excess liquidity in the banking system
A Reuters report suggested that the debate over the multi-trillion-euro excess liquidity in banks would likely start in the coming month
The excess liquidity reduces the impact of the ECB's rate hikes, resulting in significant interest payments and losses for some central banks
Some analysts believed that peripheral stories like the ECB's liquidity issue would have limited impact on the dollar compared to broader narratives like U.S. exceptionalism
Traders expected the Federal Reserve to maintain interest rates at its upcoming meeting but were keenly focused on the central bank's forward guidance
The Australian dollar gained 0.43% after the Reserve Bank of Australia indicated that more interest rate hikes were likely in the future
The Canadian dollar rose 0.62% to a six-week high against the U.S. dollar due to expectations of additional interest rate hikes by the Bank of Canada following higher-than-expected inflation data