The dollar was well supported ahead of publication of US Federal Reserve minutes on Tuesday, hitting a 10-week high versus sterling and hovering near last week's 16-month highs against the yen.
The euro struggled on concern that a coalition pact between Germany's main parties might dilute economic reforms in Europe's largest economy. "The euro is being hit by wranglings in Germany. Yes, they avoided snap elections, but the question is at what cost," said Mitul Kotecha, head of foreign exchange research at Calyon in London.
"The government is not seen functioning smoothly," he added. At 1141 GMT the dollar traded 0.4 percent up on the day at $1.2022 per euro. It was also about 0.3 percent stronger versus the Swiss franc and the British pound, after hitting its highest level since July 28 at $1.7472 per sterling.
The dollar was steady versus the yen at 113.97, but a rise above 114.42 would bring the US currency to its highest level against the yen since mid-2004.
"The Fed minutes are one reason why the dollar has bounced back. The message could actually be pretty hawkish," said Paul Mackel, currency strategist at ABN Amro in London.
"They could highlight that they are more concerned about inflation than the market is expecting and that should buoy the dollar."
The Fed minutes from the central bank's policy meeting on September 20, when it raised interest rates by a quarter percentage point to 3.75 percent, were due at 1800 GMT.
German officials announced on Monday that reform-minded conservative leader Angela Merkel would head the country's new government.
But market enthusiasm about her victory quickly waned after details of the coalition emerged, showing that the Social Democrats (SPD) won the right to name the key finance, labour and health ministers.
"The euro has depreciated since this announcement, against the dollar, yen and sterling, suggesting that the outcome to the German political impasse is not one that will provide a catalyst to a sustainable euro rally," Steven Saywell, chief currency strategist at Citigroup, said in a note.
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