The dollar index, which tracks the currency against six major peers, was flat in early Asian trading, following drops of about 0.3% in each of the past two sessions.
The weakness comes despite a rise in US Treasury yields, which is also the result of weakening demand for the safest assets.
The US currency has lost ground as investors took solace in First Citizens BancShares' agreement to buy all of failed lender Silicon Valley Bank's deposits and loans, as well as overnight comments by Michael Barr, the Federal Reserve's vice chairman for supervision that SVB's problems were due to terrible risk management, suggesting it could be an isolated case.
Still, traders remain very sensitive to signs of any further cracks in the banking system.
"Issues in US banks will remain the dominant influence on the US currency in the near term," Joseph Capurso, a strategist at Commonwealth Bank of Australia, wrote in a client note, pointing to the importance of weekly data on money market flows due later in the day, which will likely highlight the shift of deposits out of small US banks into large banks.
"Another large increase in inflows to money market funds is therefore a downside risk to the US currency over the next twenty four hours," Capurso said.
