At a symposium in Jackson Hole, Wyoming, Powell on Friday emphasized the central bank's push to raise interest rates despite Trump's criticism of higher borrowing costs. But he also said the Fed sees no clear sign of inflation accelerating above 2 percent. His comments did little to change market expectations for rate hikes in September and December and disappointed some dollar bulls hoping for a more hawkish message.
"The takeaway from Jackson Hole is that the Fed may not look to tighten much more than is currently priced into markets," said Mark McCormick, North American head of Foreign Exchange strategy at TD Securities in Toronto. "It is clear the Fed cycle is close to nearing the end-game," he added.
Interest rate hike expectations have supported the dollar this year as the U.S. economy tracked a stable growth path. The Treasury yield curve on Monday reached its flattest since 2007 - a factor seen as reducing support for the dollar - in the wake of Powell's speech.
In mid-morning trading, the dollar index, which measures the greenback against a basket of six major currencies, was down 0.38 percent at 94.79 after slipping more than 0.5 percent in the previous session.
The euro rose 0.47 percent to $1.1676 after climbing as high as $1.1654, its strongest since Aug. 2. The currency advanced more than 0.7 percent on Friday.
Overall, financial markets showed a healthier appetite for risk as U.S. stocks rose, curbing the U.S. currency's safe-haven appeal. The U.S. and Mexican trade negotiators reached a trade deal on Monday, with President Donald Trump saying the deal would be called The United States-Mexico Trade agreement. Trump added that the deal with Mexico would be very special for farmers and manufacturers. Negotiations with other NAFTA neighbor Canada have not started.
The Mexican peso rose 0.76 percent against the dollar, which traded at 18.746 pesos.
In emerging markets, the Turkish lira weakened more than 0.17 percent against the dollar on Monday after a week-long holiday, hit by persisting concern about a diplomatic rift with Washington over a detained U.S. pastor.