An unexpected fall in German industrial output for the third straight month helped to weaken the euro. The drop was modest, but it underscored concerns about a slowdown and the European Central Bank's caution as it tries to wean the region off stimulus.
German exporters are struggling with weaker global demand and trade disputes driven by US President Donald Trump's policies. "The euro had its upturn halted by German data showing the third decline in as many months in a gauge of factory growth," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The European Central Bank has said it plans to leave rates unchanged through the summer of 2019. In mid-morning trading, the euro fell 0.4 percent to $1.1431. It has traded in a tight range of $1.12 to $1.15 since mid-November. Weakness in the euro supported the dollar, which rose 0.3 percent against a basket of currencies to 95.979. The dollar index has lost around 2 percent since mid-December and remains near a three-month low of 95.638 reached on Monday.
Dollar sentiment, however, has been bolstered by optimism about a possible US-China trade agreement.
Against the yen, the dollar was little changed at 108.70 yen. The British pound traded down 0.5 percent at $1.2720 and traders expect the currency to remain volatile over the next few weeks.