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Even after last week's strong U.S. jobs data for December, market watchers believe the world's biggest economy is losing momentum.

"Fed Chair Powell's comments Friday that policymakers were flexible and 'listening carefully' to financial markets helped support the impression that the Fed tightening cycle may slow or pause in the coming months," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. 

In mid-morning trading, the dollar index was down 0.54 percent at 95.66, not far from a 2-1/2-month low of 95.68 hit last week.

The Fed raised rates four times in 2018. Waning expectations of a U.S. rate hike boosted the euro , which rose 0.76 percent to$1.1478. The Swiss franc also gained sharply versus the dollar, which fell 0.72 percent to 0.9791 franc.

Money markets have priced out a U.S. rate hike this year and are even pricing in a small probability of a rate cut in 2020.

Financial markets are also optimistic about a meeting of U.S. officials and their counterparts in Beijing this week, the first face-to-face talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed on Dec. 1 to a 90-day truce in their trade war.

·       U.S. government debt yields rose slightly Monday amid renewed trade talks between the U.S. and China as well as robust jobs data and comments from Federal Reserve last week.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.68 percent, while the yield on the 30-year Treasury bond was up at 2.983 percent.

·       U.S. President Donald Trump and Indian Prime Minister Narendra Modi discussed reducing the U.S. trade deficit with India and increasing their cooperation in Afghanistan in a telephone call on Monday, the White House said.

·       U.S. President Donald Trump has not made a decision on whether to declare a national emergency over his demand for border wall funding and the White House counsel’s office is studying the matter, Vice President Mike Pence said on Monday.

Trump has said he would consider declaring a national emergency to bypass Congress and proceed with construction of the wall without its approval.

President Donald Trump would almost certainly face a legal challenge if he carries out his threat to get funding for a U.S.-Mexico border wall by declaring a national emergency and circumventing Congress’s purse-strings power.

Legal scholars said it was unclear exactly how such a step would play out, but they agreed that a court test would likely focus on whether an emergency actually exists on the southern border and on the limits of presidential power over taxpayer funds.

Declaring an emergency would likely end a 17-day-old partial government shutdown. But it could also result in a long court fight, possibly stretching into Trump’s 2020 reelection bid and emboldening critics who accuse him of authoritarian tendencies.

·       The European Union is considering ways to help Prime Minister Theresa May convince the British parliament to back the Brexit treaty she agreed with EU leaders last month but ruled out on Monday any change to the deal.

·       North Korean leader Kim Jong Un is visiting China at the invitation of Chinese President Xi Jinping, Chinese and North Korean state media reported on Tuesday, as preparations for a second summit with U.S. President Donald Trump continue.

China’s official Xinhua news agency also confirmed the visit and said Kim is visiting China from Monday to Thursday. The report did not state the purpose of the visit.

·       Oil prices climbed on Monday, rebounding further from 1½-year lows reached in December on support from OPEC production cuts and steadying equities markets.

U.S. West Texas Intermediate crude oil futures ended Tuesday's session 56 cents, or 1.2 percent, higher at $48.52 a barrel. Brent crude futures rose 27 cents, or about half a percent, to $57.33 a barrel, up from December's slide below $50, which was its lowest level since July 2017.