The euro hit a nine-month low against the dollar today to extend recent gains for the dollar.
The euro fell to $1.2036 this morning, its lowest level since early September 2004.
The US Federal Reserve is widely expected to raise rates by a quarter percentage point at its next policy meeting on June 29th-30th, which would be its ninth straight rate rise and take its funds rate to 3.25 per cent.
The outlook for higher US interest rates has attracted foreign capital into the country, offsetting concerns about the huge US current account deficit.
US April capital flows data, due on Wednesday, could add to evidence the United States is comfortably financing its trade deficit.
In contrast, the euro zone's sluggish economy is raising expectations the European Central Bank's next move may be an interest rate cut. ECB chief economist Otmar Issing has said he could not rule out a rate cut.
The central bank has kept rates at 2 per cent since June 2003.