Dollar weakens

The US dollar retreated from seven-month highs on Monday as investors evaluated whether the Federal Reserve will let inflation run above target before raising interest rates, and as some investors took profits from the recent dollar rally.

Fed Chair Janet Yellen said on Friday that the US central bank may need to run a "high-pressure economy" to reverse damage from the 2008-2009 crisis that depressed output, sidelined workers and risks becoming a permanent scar.

"The question is if the Fed is going to let inflation run hot and then have to tighten very aggressively at the back end of the cycle, which would have potentially negative economic implications," said Mark McCormick, North American head of FX strategy at TD Securities

in Toronto.