The dollar rose against major currencies Tuesday amid gains in US equity markets and increased confidence in the US economic recovery.
At 2215 GMT, the euro traded at $1.2935, down from $1.2975 late Monday.
The dollar also hit a four-and-a-half year high against the yen, trading at 102.21 yen, up from 101.82.
The euro rose against the yen, trading at 132.29, up from 132.11.
The euro fell against the dollar after the ZEW reading of German consumer sentiment for May came in barely at 36.4, lower than the 38.3 reading expected by analysts and just 0.1 points up from April.
"It was the latest German indicator to highlight worries about the euro zone's largest economy joining other major nations in the bloc in recession," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, Inc.
Markets were looking ahead to Wednesday's release of European GDP and how that will affect European Central Bank policy.
"Softer than expected growth reports would play up the risk of additional monetary easing from the ECB and possibly even negative deposit rates from the central bank, a scenario that has been publicly floated by various ECB officials," Esiner said.
Meanwhile, markets had a "delayed reaction" to Monday's US better-than-expected retail sales figures, the latest in a string of solid US economic datapoints, said Kathy Lien, managing director at BK Asset Management.
Lien also pointed to new peaks for US stocks and higher US Treasury yields as fresh evidence that American assets are under demand. She cited a weekend Wall Street Journal article that said the Federal Reserve has begun to strategize how to pull back from its quantitative easing measures.
"The mere fact that the US central bank is thinking about reducing accommodation puts them in a very different position" from the European Central Bank, the Bank of Japan and others. "This alone is enough justification for a sustainable dollar rally."
The British pound weakened against the dollar, trading at $1.5223, down from $1.5298.
The dollar gained on the Swiss franc, trading at 0.9654 compared with 0.9575.