The dollar was little changed against the euro on Monday as investors focused on European manufacturing data due on Thursday for signs that growth in the region is improving. "The pace of deterioration in that part of the world has begun to ebb and I think investors are waiting for more concrete signs that we may have passed the worst," said Mazen Issa, senior FX strategist at TD Securities in New York.
Improving European data would likely bolster risk appetite and send equities prices higher. That in turn could be negative for the greenback as investors chase higher-yielding opportunities elsewhere.
"The dollar has shown a fairly strong relationship with relative equity prices for the US versus the rest of the world, and to the extent that we move into an environment where non-US asset markets begin to perform ... we may see a tactical move lower in the dollar," Issa said.
Although the dollar tends to underperform when risk appetite grows, data on Friday showed speculators bolstered their net long dollar position in the latest week. It is now at its highest level since December 2015, while traders remain short the euro.
Data on Friday showing that China's exports rebounded in March while new bank loans rose more than expected has helped to boost risk sentiment.
Investors are also focused on US-China trade talks, with any deal between the two countries seen as likely to remove headwinds to global growth.
US Treasury Secretary Steven Mnuchin said on Saturday a US-China trade agreement would go "way beyond" previous efforts to open China's markets to US companies and he hoped that the two sides were "close to the final round" of negotiations.
US negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to two sources briefed on discussions, marking a retreat on a core US objective for the trade talks.
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