The U.S. dollar was broadly stronger, hitting a four-year high against a basket of currencies, a six-year peak against the yen and a 13-month high against the New Zealand dollar. German inflation data expected to keep pressure on the ECB to ease monetary policy further, while unrest in Hong Kong hurt Asian-exposed European shares.
Data from Reserve Bank of New Zealand showed the central bank intervened last month to speed its currency's descent.
Data on Friday showing higher U.S. growth in the second quarter fueled speculation that a Federal Reserve interest rate hike may come sooner than expected, in striking contrast with the outlook for the European Central Bank.
"The strength of the dollar is forcing investors to move away from a lot of the stock market assets and put it into the greenback," said James Hughes, chief market analyst at Alpari.
Near-zero inflation in the euro zone fuels expectations that the ECB will eventually start printing money to buy government bonds, launching a program known as quantitative easing, or QE. Economists polled by Reuters see German inflation at 0.8 percent in September, with euro zone inflation data due on Tuesday expected to show price growth at 0.3 percent. Spanish inflation came in at minus 0.3 percent, in line with forecasts.
The European Central Bank meets on Thursday. Earlier the single currency dropped to 22-month low of $1.2664 and last stood at $1.2690, unchanged on the day.
The dollar index, which tracks the U.S. unit against a basket of major rivals, climbed as high as 85.798. It was last flat at 85.627.
The pan-European FTSEurofirst 300 index was flat at 1,376.98 points, as falls in Asian markets, fueled by unrest in Hong Kong, capped a Wall Street-led rebound. Asia-exposed shares such as miner Rio Tinto, emerging market-focused lender HSBC and Richemont fell between 1 percent and 1.7 percent as riot police advanced on Hong Kong democracy protesters.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.2 percent, hitting its lowest level since mid-May.
Hong Kong shares dropped 2.3 percent to three-month lows, shaken by heavy pro-democracy protests.
"Hong Kong is a real storm in a teacup but I'd sell HSBC after its outperformance," Justin Haque, a broker at Hobart Capital markets said. "This is another layer that adds to a gloomy outlook for October."
In the bond market, Italian and Spanish yields rose 4-5 bps to 2.43 percent and 2.25 percent, respectively, on the back of concerns about political instability.
Italian Prime Minister Matteo Renzi faces rumors that he could face pressure to quit, while the president of Spain's Catalonia region signed a decree on Saturday calling for a referendum on independence to be held on Nov. 9.
