The euro was on track for its biggest one-day drop since September as German inflation eased in December, while the dollar rose to a two-week high with focus turning to the Federal Reserve's minutes from the December meeting.
The single currency was last down around 1.3 per cent against the dollar at $1.0526, its lowest level since December 12th and on track for its biggest daily fall since September 23rd last year.
German state inflation data showed an easing of price pressures in December, indicating national inflation may also have slowed for a second month due in part to the government's one-off payment of household energy bills.
Investor attention this week is also on the US Federal Reserve's December meeting minutes scheduled for release on Wednesday, with traders looking for clues to what rate path is likely to be taken.
The US central bank raised interest rates by 50 basis points last month after delivering four consecutive 75-basis point hikes, but has said it may need to keep interest rates higher for longer to tame inflation.
The dollar index, which measures the US unit against six major currencies including the euro, was last up 1.1 per cent at 104.82. The index rose 8 per cent last year in its biggest annual jump since 2015 on the back of the Fed raising interest rates to tackle inflation.
Sterling was last trading at $1.1933, down 1 per cent on the day, briefly hitting its lowest level since November 30th last year.
