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The dollar weakened on Monday as investors weighed up the recent drop in U.S. government bond yields, while anti-government protests in China sent the yuan to a two-week low.

Protests have flared across China and spread to several cities in the wake of an apartment fire that killed 10 people in the city of Urumqi in the country's far west. Hundreds of demonstrators and police clashed in Shanghai on Sunday night.

China's onshore yuan finished the domestic session around 0.5% lower at 7.199 per dollar, the lowest close since Nov. 10. The offshore yuan fell to a more than two-week low in Asian trading and was last down 0.1% at 7.201.

"We're really looking at the government response to what's happening ... the government response is so unpredictable, and of course that just means derisking," said Chris Weston, head of research at Pepperstone.

The Australian dollar , often used as a proxy for the yuan, slid 0.7% to $0.671.

Elsewhere in currency markets, the dollar was last down 0.99% to 137.77 yen . Earlier in the session it hit 137.57, its lowest level since Aug. 26.

Stephen Gallo, European head of FX strategy at BMO Capital Markets, said a fall in U.S. bond yields was making the dollar less attractive.

"Risk-off conditions in global markets related to China's COVID situation appear to be showing up in lower long-term sovereign debt yields," he said.

"Net-long dollar/yen remains one of the larger positions amongst FX leveraged funds, and these declines in appetite and longer-term yields may have spooked some investors."

Meanwhile, the euro rose 0.41% to $1.0445, while sterling was up 0.17% at $1.21.

China's stringent COVID restrictions have taken a heavy toll on its economy, and authorities have implemented various measures to revive growth.

"Companies (in China) are currently facing weaker retail sales from a higher number of COVID cases and falling home prices from unfinished home projects," said Iris Pang, chief economist for Greater China at ING.

On Friday, the People's Bank of China (PBOC), the nation's central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

The latest developments in China appeared unable to stem the U.S. dollar's decline, which has been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of rate hikes - a view that was supported by minutes of the Fed's November meeting released last week.

The U.S. dollar index opened higher on Monday after closing on Friday at 106.05, but was last down 0.66% at 105.65.

Fed Chair Jerome Powell is due to speak on the outlook for the U.S. economy and the labour market at a Brookings Institution event on Wednesday, which could provide more clues on the outlook for U.S. monetary policy. (Reuters)