Dollar recoups some losses as focus shifts to Fed remarks at Jackson Hole

"The big support for the dollar here is that the U.S. economy continues to outpace that of other major economies," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman, adding that he expects U.S. rates to stay unchanged for the rest of the year, contrary to market pricing.

Traders are pricing in no change to borrowing costs in September but see a 70% chance that the Fed will hike interest rates by at least 25 basis points by December as Middle East tensions keep oil prices elevated. However, analysts said that no rate hikes this year from the central bank could limit the dollar's gains.

"I don't expect the dollar to make new highs, because of the risk of a more dovish Fed repricing and the lack of U.S. fiscal credibility are two big headwinds."

Currency and bond markets were still recovering from the Treasury's attempt last week to limit a rise in long-term borrowing costs through increased long-term bond buybacks.