NEW YORK (CNN/Money) - The dollar fell Monday on profit taking following last week's multi-day rally, while bonds ended the day mixed after Federal Reserve officials raised concerns about the specter of inflation.

In the currency market, the dollar fell as traders took profits from last week's rally that saw the greenback gain 5 cents on the euro.

Monday afternoon the euro bought $1.3083, up from $1.3053 late Friday. Against the Japanese yen, the dollar bought ¥104.21, down from ¥104.83.

"Today we are just recovering from the major dollar rally of last week. We could see one more dollar spike up before the trade figures on Wednesday, which will underscore the issues affecting the dollar," John McCarthy, director of foreign exchange trading at ING Capital Markets LLC in New York, told Reuters.

Numbers on the November trade deficit will be released Wednesday. Economists' median forecast for the U.S. trade balance is for a deficit of $54.0 billion in November, just below the record $55.46 billion shortfall reached in October.

The U.S. trade and budget deficits have been among the key factors behind the dollar's three-year decline, and some analysts believe the greenback has further to fall to correct these imbalances.

In Treasuries, the benchmark 10-year note lost 1/32 of a point to 99-25/32 to yield 4.28 percent, up slightly from 4.27 percent late Friday. The 30-year bond gained 7/32 of a point to 108-4/32 to yield 4.82 percent, down from 4.84 late Friday. Bond prices and yields move in opposite directions.

The two-year note inched down 2/32 of a point to 99-18/32 to yield 3.21 percent, while the five-year note lost 2/32 of a point to 98-31/32, yielding 3.73 percent.

Atlanta Federal Reserve President Jack Guynn, who does not vote in the central bank's monetary policy committee, suggested that earlier pledges for measured interest rate hikes were less binding than previously thought.

YOUR E-MAIL ALERTS Follow the news that matters to you. Create your own alert to be notified on topics you're interested in. Or, visit Popular Alerts for suggestions. Manage alerts | What is this?

Separately, Fed Governor Edward Gramlich said that there needs to be more foreign demand for U.S. assets and debt to help correct the nation's huge fiscal imbalances, echoing concerns over price pressure raised at the December meeting of the Federal Open Market Committee.

"If inflation picks up more than we, and the FOMC, currently expect, the pace of tightening could accelerate," Lewis Alexander, global head of emerging markets at Citigroup, told Reuters.

Traders will closely watch the December retail sales report due out Thursday and December producer prices to be released Friday for signs of economic strengthening and rising inflation.  

-- Reuters contributed to this report