During U.S. morning trade, the dollar fell to its lowest level since February against the euro, with EUR/USD advancing 0.73% to 1.3432.
The dollar came under pressure amid widespread speculation that the Fed may start to unwind its asset purchase program as soon as September after data last week showed that U.S. weekly jobless claims fell to an almost six year low.
Investors were looking to the minutes of the Fed’s July meeting on Wednesday for further indications as to when the central bank may start to pull back its asset purchase program.
Fed Chairman Ben Bernanke has said that the decision to start tapering will depend on whether economic data is strong enough.
Demand for the single currency continued to be underpinned after data last week showed that the euro zone economy returned to growth in the second quarter, emerging from an 18-month recession.
The dollar fell to one-week lows against the yen, with USD/JPY losing 0.48% to trade at 97.09.
The dollar was close to two-month lows against the pound, withGBP/USD rising 0.21% to 1.5682.
The dollar also moved lower against the Swiss franc, with USD/CHFshedding 0.77% to trade at 0.9173.
Elsewhere, the greenback was broadly higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD falling 0.32% to 0.9084, NZD/USD dropping 1.03% to 0.7984 and USD/CAD climbing 0.42% to 1.0389.
The Australian dollar weakened after the minutes of the Reserve Bank of Australia’s August meeting indicated that further rate cuts remain possible in the future.
Meanwhile, the New Zealand dollar fell sharply after Reserve Bank of New Zealand Governor Graeme Wheeler called the currency "overvalued".
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.51% to 80.87.
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