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The dollar fell to multi-month lows on Monday on Monday after a handful or reports showed manufacturing overseas was recovering, and a similar report in the U.S. is expected to show the sector is the best it has been since August.

The news, as well as some better earnings reports from banks, has supported equity markets, which has lately spelled trouble for the U.S. currency because investors no longer desire its safe-haven status.

The dollar index (DXY), which tracks the U.S. unit against a trade-weighted basket of six major currencies, was at 77.986, down from 78.329 in late North American trading on Friday.

Earlier, it fell to the lowest in 2009.

The British pound (CUR_GBPUSD) rose more than 2% to buy $1.6828, after touching a nine-month high.

The euro (CUR_EURUSD) changed hands at $1.4314, up from $1.4257 late Friday.

A report at 10 a.m. Eastern time is expected to show the manufacturing sector of the U.S. economy is as good as it has been since August. The Institute for Supply Management's diffusion index is expected to rise to 46.2% in July from 44.8% in June, according to a survey of economists by MarketWatch. Readings under 50 still indicate contraction.

The U.K. manufacturing-purchasing-managers' index unexpectedly grew above the 50 line in July indicating economic expansion for the first time in 15 months, data released on Monday showed.

Euro-zone manufacturing PMI data also showed an improvement, though it still remained below the 50 mark.

Separately, the China CLSA PMI rose to a 12-month high.

"Economic data this morning are adding legs to the perception that the worst of the global downturn is over," said Jane Foley, research director at Forex.com.

One dollar bought 95.02 Japanese yen, up from 94.80 yen on Friday.