Dollar drifts as US-Iran conflict intensifies; sterling edges higher

Elsewhere, the U.S. dollar was down 0.17% at 6.7663 against the Chinese yuan CNH= in offshore trade after China kept its benchmark lending rates unchanged for a 14th consecutive month on Monday, in line with market expectations.

Against the yen JPY=, the U.S. dollar was flat at 162.34 yen in thin liquidity as Japan observed the Marine Day holiday.

Markets continue to anticipate no change to rates at the Federal Reserve's next meeting on July 29, with Fed funds futures pricing an implied 85.6% probability of a hold, compared with a 61.5% chance a month ago, according to the CME Group's FedWatch tool.

Cleveland Fed President Beth Hammack on Friday added her voice to a growing chorus of policymakers arguing interest rates may need to rise to beat back persistent inflation, setting up a charged debate at the Fed's next meeting and the possibility of dissents at Chair Kevin Warsh's second meeting at the helm.