The euro rose against the dollar on Tuesday ahead of several interest rate decisions this week in Europe. The 16-nation euro bought $1.2854 in morning European trading, up from $1.2827 in late New York trading on Monday. The British pound fell to $1.4243 from $1.4269.
European Central Bank President Jean-Claude Trichet has indicated the bank will likely hold rates steady at 2 percent at Thursday's meeting, while the Bank of England is expected to chop rates by as much as 1 percentage point.
Lower interest rates often drive investors from a currency as they move funds where they earn better returns.
In other trading, the dollar was flat against the Japanese yen Tuesday, buying 89.60.