Dollar sags

The dollar slid on Monday against the yen and wallowed near its lowest in almost four years against the euro, as market optimism over US trade deals bolstered bets for earlier interest rate cuts by the Federal Reserve.

The dollar also languished near a four-year low against sterling and a trough of more than decade versus the Swiss franc after the White House neared a deal with China, while Canada scrapped a digital services tax to restart stalled talks.

Both the yuan and Canadian dollar gained.

Investors interpreted Fed Chair Jerome Powell's testimony to US Congress last week as dovish, after he said rate cuts were likely if inflation did not spike this summer because of tariffs.

Bets for at least one quarter-point reduction by September have risen to 91.5 percent, CME Group's FedWatch Tool shows, from about 83 percent a week earlier. The Fed's rate-setting committee also meets next month, but does not gather in August.

"The market pricing implies a (September) cut as a slam dunk," Chris Weston, head of research at Pepperstone, wrote in a client note.

Friday's monthly US payrolls report is this week's "marquee risk event", Weston said, and the risk to the dollar "seems asymmetric, given the Fed's reaction function is biased towards the timing of the next cut."

That meant the dollar was more likely to suffer a rout on weak numbers than rally on a hot outcome, he added.

An additional weight on the dollar came from Donald Trump's continued assault on Powell, after the US president said on Friday he would "love" it if the Fed chief resigned before his term ended in May.

Trump also said he wanted to cut the benchmark rate to 1 percent from 4.25 percent to 4.5 percent now, and reiterated that he planned to replace Powell with a more dovish Fed chairperson.

Investors are also keeping an eye on Trump's massive tax-cut and spending bill now facing the Senate, which could add $3.3 trillion to the national debt over a decade, the Congressional Budget Office has estimated.

The dollar index , which measures the US currency against six major counterparts, edged down 0.1 percent to 97.083, staying close to its more than three-year low of 96.933 late last week.