The euro hit a fresh 13-month low against the dollar in early European trading before recovering slightly.
The single European currency dropped to $1.1869, the lowest level since May 14th, 2004, before easing up to $1.1879.
US markets were closed yesterday for Independence Day.
Futures markets are increasingly pricing in the prospect of three more US rate rises this year, taking the Fed funds rate to 4 per cent, helping to the dollar make gains against European currencies.
The euro was also hurt by comments yesterday from Christian Noyer, a member of the European Central Bank’s governing council, who said: "It is possible for a country to leave the euro zone because member states are sovereign."
Mr Noyer’s words came just as jitters over the possible eventual break-up of the euro zone - stoked by the collapse of the EU’s constitutional treaty and secessionist comments from some Italian MPs - were starting to dissipate.
Agencies