Hopes that U.S. leaders will reach a budget deal pushed the dollar lower against the euro Monday. Traders were also hopeful that Greece will get its next batch of bailout money.
Riskier currencies such as the euro tend to strengthen when traders think the economy is getting better. The euro rose to $1.2807 late Monday from $1.2727 late Friday.
President Barack Obama and leaders in Congress are in talks to avoid a "fiscal cliff" on Jan. 1, when tax increases and mandatory government spending cuts are set to take effect.
European finance ministers are meeting Tuesday to talk about Greece's next payment.
The dollar rose to 81.33 Japanese yen from 81.22 yen. Concerns that the Bank of Japan might launch more stimulus pushed the dollar to a seven-month high of 81.52 Japanese yen in early trading Monday.
The British pound rose to $1.5905 from $1.5883.
The dollar fell to 0.9403 Swiss franc from 0.9464 Swiss franc and to 99.66 Canadian cents from 1.0016 Canadian dollar.