The dollar rose to a two-month high against the euro on Tuesday, while oil prices climbed to a seven-week high and European share prices slipped, weighed down by a pullback in British supermarket giant Tesco.
Bunds tracked the euro down as it toyed with a push below $1.30 and as the focus in U.S. Treasury markets shifted to Wednesday's U.S. consumer inflation report and the risk of more aggressive U.S. monetary tightening.
A raft of scheduled speeches from Federal Reserve officials added to the speculation.
"The Fed has struck a somewhat more hawkish tone and today's Fed speakers could hint again the pace of interest rate hikes could be faster. This is giving cyclical support for the dollar," Shahab Jalinoos, senior currency strategist at ABN AMRO, said.
The euro changed hands for around $1.3025 and 102.65 yen or so bought a dollar, after the Japanese currency hit its strongest level in five years on Monday at 101.65.
Despite the dollar's rebound, investors were cautious in buying the greenback aggressively before closely-watched U.S. capital flows data at 1440 GMT for November, when the current account deficit widened sharply.
Crude oil futures rose sharply through $49 a barrel as bitterly cold weather in the fuel-guzzling north-eastern United States boosted the cost of heating oil and sparked fresh concerns about lean supplies.
The FTSEurofirst 300 index of leading European shares lost 0.35 percent to around 1,048 points -- some 10 points off last week's 2-1/2 year high.