- The dollar rebounded against a basket of the other major currencies on Monday, but the greenback was still on track for a large monthly decline after U.S. Treasury Secretary Steven Mnuchin’s tacit endorsement of a weak currency last week.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.38% to 89.21 by 09:09 AM ET (14:09 GMT), extending its recovery from last Thursday’s three year trough of 88.25.

For the month, the index is down around 2.8%.

Investors remained cautious on the outlook for the dollar after the U.S. Treasury secretary said last Wednesday at Davos that a “weaker dollar is good for trade.”

The greenback recovered somewhat after President Donald Trump said Thursday the U.S. currency would get “stronger,” appearing to contradict Mnuchin’s comments.

The remarks were seen by markets as a departure from traditional U.S. currency policy. The risk of a weaker dollar is that it could undermine confidence in a wide swath of U.S. assets, including the U.S. Treasury market.

The dollar is also losing its relative yield attraction for investors. U.S. Treasury yields climbed to fresh multi-year highs on Monday, as investors braced for major central banks to begin scaling back ultra-easy monetary policies.

A faster rate of monetary tightening outside the U.S. would lessen the divergence between the Federal Reserve and other central banks.

Data on Monday showed that U.S. consumer spending rose solidly in December, while the personal consumption expenditures price index - the Fed’s preferred inflation measure - climbed from 0.1% in November to 0.2% last month. On an annual basis it rose 1.5%, staying below the Fed’s 2% target.

The data was unlikely to prompt the market to price in more rapid tightening beyond the Fed’s plans for three rate hikes this year.

The euro was lower, with EUR/USD down 0.56% to 1.2357, down from the more than three year peaks of 1.2537 reached on Thursday.

The dollar was slightly higher against the yen, with USD/JPY climbing 0.14% to 108.74 after falling to a four-and-a-half month low of 108.27 on Friday.

Sterling was weaker against the dollar, with GBP/USD losing 0.55% to trade at 1.4083 as renewed concerns over Brexit weighed, with British Prime Minister Theresa May’s European Union withdrawal bill under fire.