During today's European trading, the U.S. dollar fell slightly but remained near a four-month high as rising U.S. Treasury yields fueled demand for the dollar and prompted hedge funds to cut bearish positions.

Turkey's shock decision to replace its hawkish central bank governor has also bolstered demand for the dollar as a safe haven.

Markets have doubted the dollar's gains in recent weeks as investors bet that the global economic recovery will push the purchase of riskier currencies.

But rising US Treasury yields and the prospect of new lockdowns in a number of eurozone countries have led to widespread cuts in short dollar rates.

Later this week, investors will turn their attention to a large number of auctions for US bonds, whose strong sell-offs have been observed recently amid improving prospects for economic growth and inflation.

In addition, Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen are expected to appear together for the first time on Tuesday before the US House of Representatives Financial Services Committee to talk about the policy of the Fed and the Treasury Department during the pandemic.