The euro rallied on Tuesday on a report citing internal tensions within the European Central Bank over the leadership style of its chief, Mario Draghi, that has the markets expecting limits on future loosening of monetary policy.
In an exclusive report by Reuters, national central bankers in the euro area plan to challenge Draghi this week at a regularly scheduled ECB meeting. They are particularly angered by his effective setting of a target for increasing the bank's balance sheet immediately after the governing council explicitly agreed not to make any figure public, ECB sources told Reuters.
A potential slowing down of the ECB's measures to boost liquidity in the euro zone in the hopes of spurring borrowing and investment limits the selling pressure on the euro.
The reported tensions come after the European Commission on Tuesday slash its economic growth forecast for the euro zone for 2015 to 1.1 percent from an earlier forecast of 1.7 percent.
The euro hit a high of $1.2577 on the EBS trading platform, but traded back to $1.2557, up 0.60 percent on the day.
The potential for slowing down a move toward looser monetary policy contrasts sharply with Japan, which announced an additional massive easing policy last week that sent the yen to a roughly seven-year low against the greenback.
The euro traded at 142.45 yen, up marginally while the dollar fell 0.55 percent to 113.40 .
The dollar index, which measures the greenback against a basket of currencies, fell 0.40 percent from Monday's four-year high to 86.96.
Oil currencies hammered
The Norwegian crown and the Canadian dollar fell sharply as world oil prices fell. Brent crude prices dropped more than 3 percent to their lowest in more than four years after top oil exporter Saudi Arabia cut sales prices to the United States.
The U.S. dollar rose to its strongest in more than five years against its Canadian counterpart, at C$1.1426. It last traded near C$1.1397, up 0.30 percent on the day. The euro advanced on the Norwegian crown by 1.35 percent to 8.6084 crowns, its weakest since late 2009.