The dollar was 0.4 percent weaker against the yen and 0.2 lower against the euro.
The safe-haven yen was the winner on Monday as investors sold stocks and riskier assets including commodities, but the dollar outperformed higher-yielding currencies on fresh talk of an interest rate hike by the Federal Reserve in the near term.
The focus will be on Fed Governor Lael Brainard's speech later in the day. The timing of a speech by the Fed's most-noted dove, just before the Fed's Open Market Committee blackout period, is too much of a coincidence for many in the markets with some expecting her to send a signal that further tightening is coming.
The dollar was 0.4 percent weaker against the yen and 0.2 lower against the euro, but rose against the higher-yielding Australian dollar and was firmer across the board against most emerging market currencies.
The currency market was also keeping an eye on the sell-off in global bonds, with perceived limits to central bank policies having taken German and Japanese sovereign bond yields to multi-month highs. U.S. Treasury yields have also tracked their global peers higher, underpinning the dollar.
"Rising bond yields have the potential to put risk assets under significant selling pressure," said Hans Redeker, head of currency strategy at Morgan Stanley.
"A risk-averse trading strategy suggesting lower emerging markets and commodities and a higher dollar seems warranted. The dollar may rally 3 percent from here, but we think it is too early to assume a long-term rally to resume from here," he added.
While the stock market's fall was the main driver behind the yen's rise, the Japanese currency got a boost earlier in the Asian session from safe-haven flows in reaction to Democratic candidate Hillary Clinton falling ill at a Sept. 11 memorial ceremony and diagnosed with pneumonia.
Markets are mostly expecting Clinton to win the presidency in November and have not factored in the implications, both economic and for national security, should Republican nominee Donald Trump prevail.
A spate of Fed speakers kept hopes alive for a September rate hike, despite some recently disappointing economic data including only a modest rise in U.S. nonfarm payrolls.
After Boston Federal Reserve President Eric Rosengren spoke on Friday, odds on a rate hike in September rose to a 30 percent probability from 24 percent before his comments. Some analysts said Rosengren's upbeat comments have set the stage for something similar from Brainard, despite subdued data.
"Brainard's speech will be the last scheduled appearance from a Fed policymaker ahead of the pre-meeting blackout period and many market participants see this as a last opportunity to for the Fed to fine-tune expectations ahead of the meeting," Credit Agricole analysts said in a note.
Speculators increased their bets on the U.S. dollar for the first time in six weeks in the week ended Sept. 6, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.