- The dollar initially rose against the euro to the strongest since April 2017 but then pared gains to trade 0.4pc lower at $1.0742 per euro.
- The US currency bounced between gains and losses but last traded down 0.6pc at 110.07.
LONDON: The dollar erased most of its early losses and rose towards a three-year high on Monday as a global selloff in stocks rippled over into early European trading, burnishing the safe-haven appeal of the greenback.
A 9pc rally in the value of the greenback against its major rivals over the past two weeks came to a brief halt on Friday after major central banks stepped up their dollar injection facilities to tide over a global scramble for funding.
But Monday's Asian market trading brought a fresh round of problems with stock markets collapsing and raising concerns that global central banks' actions are not enough.
"The result is that the banking system simply doesn't have enough dollars to lend to everyone who wants to borrow them now..For now, it seems that the demand for the US dollar is insatiable," said Marshall Gittler, head of investment research at BDSwiss Group.
Against a basket of its rivals, the greenback was broadly steady at 102.38 after falling as much as 0.7pc in early Asian trading. On Friday, it hit a January 2017 high of 102.99.
Also fuelling the dollar's rise was a surprising turnaround in broader dollar positions among hedge funds to a net short bet from an overall long bet, according to latest positioning data. That raised speculation that the dollar's rally could be partially explained by short-position covering by traders.
Though legislators in Washington were unable to clear US stimulus measures on Sunday as Republicans and Democrats tussled over the details of a proposed $1 trillion spending package, stoking disquiet about the dollar's gains, analysts said the majority of investors preferred to hold cash.
"We've moved from risk-off to a phase where major players are competing with each other for the safety of holding dollars in cash," said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo. "There are still a lot of investors who need to sell riskier assets, and they want to hold their money in dollars."
Against the yen, the US currency bounced between gains and losses but last traded down 0.6pc at 110.07.
The dollar initially rose against the euro to the strongest since April 2017 but then pared gains to trade 0.4pc lower at $1.0742 per euro.
Apart from the yen, the dollar closed in on multi-year highs against the Australian and New Zealand dollars as the economic costs of self-isolation triggered the largest intraday decline ever in New Zealand shares.