Sterling hit a record low against the euro and a nine-month trough against the dollar as renewed fears about the British retail sector stoked expectations of a UK interest rate cut.
Overall, currency investors remained focused on the U.S. equity market, typically a barometer of risk aversion. Wall Street is off to its worst start in history as investors fear the U.S. economy is sliding into a recession.
In early New York trading, the dollar was up 0.3 percent against a basket of six major currencies at 76.302, in large part thanks to a 0.3 percent rise against the yen to 109.23 yen, pulling away from a six-week low of 107.86 yen on Friday, according to Reuters data.
Traders covered their short dollar positions ahead of a speech by Fed chief Ben Bernanke on Thursday.
It will be Bernanke's first public remarks on the economy this year. Recent grim U.S. manufacturing and employment data have intensified the threat of recession and likelihood the Fed will cut rates by half a percentage point later this month.
The euro was down 0.2 percent against the dollar at $1.4676, but was up almost 0.4 percent against the UK pound at 74.86 pence, having reached a record post-1999 launch peak of 74.99 pence.
Sterling fell 0.6 percent against the dollar to $1.9602, trading as low as $1.9587, a low not seen since late March.