The euro fell to a 19-month low against the dollar in early Tuesday trading on growing concerns among investors about faltering European economic growth.
The single European currency dropped to a low of 1.3237 dollars before rallying slightly to 1.3243 near mid-afternoon.
The US dollar gained strength after US Federal Reserve boss Ben Bernanke signalled on Monday there could be new plans to stimulate the US economy.
The news calmed investors, with the Dow Jones index closing up 4.7%.
There are growing fears that the world's largest economy is heading towards recession and although Mr Bernanke stopped short of saying the US was in recession, he said the American economy was now in a "very serious slowdown".
Speaking to the US House of Representatives' budget committee on Monday, he said consideration of a fiscal package by the Congress now seemed "appropriate".
On 15 July, the dollar hit $1.6038 to the euro - a record low in value for the greenback against the single European currency.
But since then, the dollar has gained 20%, fuelled by speculation it will take advantage of a slowing European economy.
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