The U.S. dollar fell against its most major rivals in the European session on Monday, as investors await U.S. inflation data that could influence the Federal Reserve's interest rate path for the rest of the year.

The CPI is expected to have increased 3.6 percent in August from 3.2 percent in the prior month. Meanwhile, the core reading is seen softening to 4.3 percent from 4.7 percent.

This week will also see the release of key U.S. reports on producer inflation, retail sales, industrial production and consumer sentiment.

CME Group's FedWatch Tool currently indicates a 93.0 percent chance the Federal Reserve will leave interest rates later this month but a 43.4 percent chance of another rate hike in November.

Risk sentiment improved as the latest inflation data from China stoked optimism about easing deflationary pressures in the world's second-largest economy.

The greenback dropped to 1.2537 against the pound, setting a 5-day low. Next key support for the greenback is possibly seen around the 1.27 level.

The greenback was down against the euro, at 1.0741. The currency may challenge support around the 1.09 region, if it drops again.

The greenback weakened to 6-day lows of 0.6443 against the aussie and 0.5933 against the kiwi, from its prior highs of 0.6376 and 0.5880, respectively. The greenback is seen finding support around 0.67 against the aussie and 0.62 against the kiwi.

The greenback depreciated to a 1-week low of 1.3579 against the loonie and a 10-day low of 145.89 against the yen, off its early highs of 1.3636 and 147.27, respectively. The next possible support for the currency is seen around 1.33 against the loonie and 137.00 against the yen.

After falling to a 5-day low of 0.8893 against the franc in the previous session, the greenback rebounded modestly in subsequent deals. The pair had closed Friday's deals at 0.8928.

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