Greenback retreated from two and a half year lows on Friday as some investors decided to adjust their positions at the end of the year.
The USD index climbed above 90.2 points after falling on Thursday to its lowest level since April 2018 around 89.7 points.
On Monday, the greenback continued its attack on the positions of its main competitors.
"Investors have been selling the dollar lately on the back of increased risk sentiment, and this was partly due to expectations of fiscal stimulus in the US," said Sumitomo Mitsui Trust Bank.
"Now that the deal is practically agreed upon, we see the classic buy-by-rumor, sell-by-fact case, and the dollar shorts are closing," they added.
Senate Majority Leader Mitch McConnell said Sunday that Democrats and Republicans have reached a $900 billion cross-party deal. The bill now needs to pass the House and Senate vote.
At the same time, market participants continue to monitor the development of the situation with the spread of coronavirus in the world.
Investors turned their attention to the defensive greenback on Monday amid reports that a new mutation in the coronavirus has been discovered in the UK, which officials say is 70% more infectious.
The WHO said that the mutated COVID-19 was also detected in Denmark, the Netherlands, and Australia.
Fears that the United Kingdom and the European Union will not be able to conclude an agreement regulating their future relationship before the expiration of the post-Brexit transition period on January 31, 2020, also contributed to the diminishing risk appetite.
"The news of lockdowns and the uncertainty surrounding the London-Brussels trade deal are making the market nervous. Sentiment could change quickly if a last-minute Brexit agreement is reached. We continue to think the fishing deal is unlikely to fail due to fisheries," said strategists at National Australia Bank.
"The overall positive attitude to risk from vaccines and incentives, plus the fact that fiscal stimulus should be funded by significant US borrowing, continues to paint a picture of dollar weakness in 2021," they added.
Therefore, experts associate the current recovery of the greenback with a technical correction and recommend using it for more profitable sales.
The main currency pair added about 140 points last week, completing it near the 1.2255 mark.
On Monday, the EUR/USD pair rolled back to local minimums around 1.2135, but then recovered quite quickly, once again rising above the level of 1.2200.
Concerns about Brexit, as well as reports that eurozone countries are expanding or imposing stricter restrictions related to COVID-19, put pressure on the single currency.
At the same time, news on vaccines against coronavirus remains a positive factor for the euro. Vaccinations have already started in the US and UK. At the same time, the European regulator intends to hold a meeting on December 21 to issue a permit for the sale in the EU of a vaccine developed by pharmaceutical companies Pfizer and BioNTech.
"The 38.2% retracement from the 2008-2017 bearish move is the next target for the EUR/USD bulls. This level coincides with the 2018 high near 1.2500 and is a strong resistance. Considering that the previous two growth attempts this year gave way to pullbacks, we can expect another correction in the coming weeks. Buying on the decline should limit the fall at 1.2000 / 1.1900," Rabobank said.