U.S. Treasury Secretary Henry Paulson said on Monday he believes in a strong U.S. dollar and that U.S officials were working to resolve the country's economic problems, including regulatory mistakes that led to excesses in the mortgage and banking sectors.

More and more U.S. investors are moving money across the pond, looking for opportunities within the European Union which  makes up 25 percent of the total global stock market capitalization of around $55 trillion.

The U.S. dollar rebounded against the euro on Monday as traders bought back the U.S. currency as the second quarter ends, but losses in the euro may be limited ahead of an expected rate hike by the ECB this week.

The dollar extended declines against the yen and fell versus the euro, after U.S. stocks accelerated their losses.

The dollar fell broadly Thursday, nearing a three-week low against the euro, after the Federal Reserve held interest rates at 2 percent, dashing expectations of an imminent rate hike.

Inflation risks have increased in the medium term and the European Central Bank stands ready to counter inflationary pressures, ECB President Jean-Claude Trichet told the EU Parliament on Wednesday.

The dollar fell to two-week lows versus the euro on Wednesday, as selling accelerated in the aftermath of the Federal Reserve's decision to hold key interest rates steady at 2.0 percent.

Germany may report a shrinking in its economy for the second quarter of this year and stagnation would probably be a positive outcome, Deputy Economy Minister Walther Otremba said on Tuesday.

The dollar extended losses against the euro on Tuesday, tumbling to a session low after data showed U.S. consumer confidence fell to a near 16-year trough.

Euro zone services and manufacturing activity both fell unexpectedly into contraction in June, a key survey showed on Monday, although the weakness may not be pronounced enough to deter an ECB rate hike in July.

The U.S. Federal Reserve cannot lower interest rates at the moment, given high oil prices and the spectre of inflation, John Lonski, chief economist at Moody's rating agency, told La Repubblica newspaper.

The euro fell after high energy costs soured German business sentiment and the euro zone's manufacturing and services sectors contracted last month, denting the case for higher euro zone interest rates.

The dollar fell broadly Friday, dragged down by a surge in oil prices and more tough inflation comments from a European Central Bank official that raised the specter of rate hikes in the euro zone beyond July.

The dollar rose Thursday, buoyed by a sharp drop in crude oil prices and a decision by the Swiss National Bank to keep interest rates steady despite record-high inflation.

The U.S. dollar edged lower Wednesday as investors adjusted their interest rate outlooks for the United States and the euro zoney