The dollar touched its highest against a basket of major currencies in nearly a week on Monday as the euro weakened on political risks linked to German Chancellor Angela Merkel's failure to form a three-way coalition government.
Merkel, whose conservatives were weakened after they won an election in September with a reduced number of seats, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations.
The development thrust Germany, Europe's biggest economy, into a political crisis that raised worries among investors of a new election if Merkel cannot form a minority government.
The news revived "a key risk factor" for the continental currency, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"With the euro losing favor, given the messy can of worms that has been tipped over in Europe, that's helping the U.S. dollar weather its own political uncertainties," he said.