Optimism about Greece's bond buyback program pushed the euro to a six-week high against the dollar Tuesday.
Traders sold the dollar as budget talks continued in Washington.
The euro rose to $1.3101 in late trading Tuesday from $1.3060 late Monday. The euro rose as high as $1.3108 earlier, its highest point against the dollar since Oct. 18.
On Monday, Greece said it will spend up to $13 billion in a bond buyback program to lower its national debt.
In the U.S., President Barack Obama said there will be no deal to avert the "fiscal cliff" unless Republicans drop their opposition to raising tax rates on the wealthiest Americans.
Traders have been worried about the U.S. "fiscal cliff," a series of tax increases and government spending cuts set to kick in at the beginning of next year unless the White House and Congress reach an agreement on reducing the budget deficit before then. Economists believe that could send the U.S. back into recession.
The British pound rose to $1.6106 from $1.6095.
The dollar fell to 81.84 Japanese yen from 82.24 Japanese yen and to 99.28 Canadian cents from 99.46 Canadian cents.
The dollar rose to 0.9260 Swiss franc from 0.9258 Swiss franc.