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The biggest mover in the currency market, though, was the New Zealand dollar, which slumped to a one-year low following revelations of a milk power contamination scare from Fonterra, the world's biggest dairy products exporter.
European shares started 0.4% higher following a record close on Wall Street last Friday when the latest US jobs report undermined hopes the Fed would begin to trim its $85 billion a month in bond purchase as soon as next month.
"I suspect those hoping for a taper in September will be disappointed," said Michael Ingram, market commentator at BGC.
As investors trimmed dollar holdings on the changing outlook, the greenback fell 0.6% to 98.32 yen and the euro firmed slightly to $1.329, clinging to its gains from Friday, when it rose 0.5% versus the dollar.
"It looks like we're in for a slightly choppy and frustrating time as the market tries to get some clarity on the Fed and what might happen in September," said Simon Smith, chief economist at FXPro.
US 10-year T-notes traded at a yield of 2.611%, still below Friday's high of 2.749%, which was just below a two-year high of 2.755% hit in July.
The New Zealand dollar hit a low of $0.7670 to reach lows not seen since June 2012 on the brewing milk powder scandal.
China said it halted imports of dairy products from New Zealand after New Zealand dairy exporter Fonterra said at the weekend it had found bacteria in some of its products that could cause botulism.
"It's a pretty serious development for New Zealand given how important dairy is. But what usually happens with these food quality issues is that as details come out, people tend to feel more reassured," said Chris Tennent-Brown, FX economist at the Commonwealth Bank in Sydney.
The Australian dollar also slipped sharply, to a three-year low of $0.8848, after the country's retail sales data fell short of market forecasts and reinforced expectations of further rate cuts by the Reserve Bank of Australia (RBA).
