The dollar edged up from a 2-1/2-week low against the yen on Monday but struggled to gain traction more broadly, as investors awaited a speech this week by U.S. President Trump for clues on his economic agenda.
Trump is set make his first major policy address to the U.S. Congress on Tuesday, and is expected to give some details on his planned infrastructure spending and tax reform.
But market participants say if the plans laid out are too vague or look slow to execute that could weigh on a dollar that reached 14-year highs earlier this year on the back of the "Trumpflation trade"—a view that Trump's policies would boost inflation and growth.
"The FX market is going to be most reactive to anything in the address which seems to reverse what we were already thinking was in train," said Stephen Gallo, currency strategist at BMO Capital Markets in London, highlighting corporate tax reform, fiscal stimulus and a rollback of regulation as the policies investors had bet on.
"Anything that shrinks from that would probably cause a decent reaction in the dollar negatively."
Treasury Secretary Steven Mnuchin said on Sunday that Trump will use the event to preview some elements of his sweeping plans to cut taxes for the middle class, simplify the tax system and make U.S. companies more globally competitive, with lower rates and changes to encourage U.S. manufacturing.
Having hit a low of 111.92 yen in early trading in Asia, the dollar was up 0.3 % at 112.29 yen by 1200 GMT. Against a basket of major currencies, it was flat at 101.08.
Economic data on Friday put pressure on U.S. bond yields and the dollar, showing new home sales grew less than expected in January and consumer sentiment weakening.
But speculators have not counted the dollar out, increasing bullish bets on it for the first time in seven weeks, according to Commodity Futures Trading Commission data released on Friday and calculations by Reuters.
The euro edged up just 0.2 % to $1.0583, as concerns that far-right anti-EU leader Marine Le Pen could win France's upcoming presidential election continued to weigh on the single currency.
Despite another raft of polls showing Le Pen losing either to centrist Emmanuel Macron or the conservative Francois Fillon, investors, mindful of the shocks of Brexit and Trump, have not counted her out, and many fear that she could lead France out of the eurozone.
"The changes in the polls perhaps won't be listened to, because people just don't trust them," said Rabobank currency strategist Jane Foley.
Sterling skidded to a twelve-day low of $1.2384 on a report that Scotland was preparing to call another independence referendum when formal Brexit negotiations are triggered in March.