The single currency has been on an uptrend the last few weeks, bolstered by generally solid European economic data. Over the last 10 days, the euro has risen 2.5 percent versus the greenback.

The dollar, meanwhile, was little changed against the yen as investors searched for fresh clues to extend a multi-month rally in the greenback before a widely-expected interest rate hike by the US Federal Reserve this week.

But with the Fed decision a few days away, markets were jolted by Draghi's hawkish comments on inflation and wage growth even though he affirmed the ECB's pledge to keep rates at their current, rock-bottom level "through the summer" of next year.

John Doyle, director of markets at Tempus Consulting in Washington, said Draghi's remarks reinforced the view that other central banks are catching up with the Fed in terms of tightening monetary policy.

"The idea of divergence between the Fed tightening and other central banks either on hold or cutting rates is not there to support the dollar anymore," Doyle said.

In late morning trading, the euro rose 0.3 percent against the dollar to $1.1783. It rose to as high as $1.1815, a 3-1/2-month peak.

The euro earlier was also boosted after German Chancellor Angela Merkel's coalition government resolved a dispute over the country's scandal-tainted spy chief on Sunday, ending a threat to the six-month-old administration.

Against the yen, the dollar was flat at 112.56 yen ahead of this week's Fed meeting.

With the market forecasting a rate hike this week, another in December and two more next year - roughly in line with Fed policymakers' projections - analysts said only unexpectedly strong data would change those bets.

"Dollar direction could boil down to how many rate hikes the Fed pencils in over the coming year," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

"The Fed could increase its forecast for 2019 rate hikes from three to four with inflation showing signs of pushing above its 2 percent goal, a hawkish scenario that would likely be positive for the dollar," he added.

Earlier the dollar snapped a two-week losing streak as the weekend brought global trade tensions back into the spotlight after Beijing released a white paper on its trade dispute with the United States, saying it would seek a reasonable outcome, while also describing US tactics as "bullying."

The dollar index was last down 0.2 percent at 94.027, mainly weighed down by the euro's gains.