In U.S. trading on Friday, EUR/USD was up 0.01% at 1.3523.
The U.S. Congress must approve a spending package by the end of the day to avoid a government shutdown, and waning faith for a last-minute deal steered investors away from the dollar and into other safe-haven assets such as the yen earlier.
Congressional Republicans and Democrats continued to spar over President Barack Obama's healthcare law, a bargaining chip to fund a spending package to keep the government running.
Republicans oppose the president's healthcare reform and want it delayed in exchange for approving a spending deal, something the Democratically controlled Senate rejected on Monday afternoon.
Still, the dollar reversed earlier losses and even inched up into positive territory at times on better-than-expected economic indicators, which boosted expectations for the Federal Reserve to begin tapering stimulus programs once fiscal jitters subside.
The Federal Reserve Bank of Dallas reported earlier that its general business activity index increased to 12.8 in September from 5.0 in August, beating market calls for the index to remain unchanged.
Separately, industry data revealed that the Chicago purchasing managers' index hit 55.7 in September from 53.0 in August, beating analysts' calls for a 54.0 reading
The data rekindled market expectations for the Federal Reserve to begin tapering its USD85 billion monthly bond-buying program this year, possibly later this month.
Fed asset purchases weaken the dollar by driving down interest rates to spur recovery, and talk of their dismantling can bolster the greenback.
Elsewhere, the euro found support on reports that Italy's Silvio Berlusconi was battling dissent within his own political party after he announced Saturday that he was pulling his ministers out of Prime Minister Enrico Letta's coalition government and called for fresh elections.
Prime Minister Letta is going before parliament for a vote of confidence on Wednesday and will need to secure a majority to remain on in government.
Separately, data released on earlier showed that the euro zone's consumer price index rose at the slowest pace since February 2010 in September, sliding to 1.1% from 1.3% in August, which capped the euro's advance against the greenback.
Analysts were expecting a 1.3% reading.
Core CPI, which excludes food, energy, alcohol, and tobacco costs slowed to 1.0% from 1.1% in August, missing market calls for an unchanged 1.1% reading.
The greenback was down against the pound, with GBP/USD up 0.30% at 1.6189.
The dollar was flat to lower against the yen, with USD/JPY down 0.03% at 98.22, and down against the Swiss franc, with USD/CHF trading down 0.23% at 0.9042.
The dollar was lower against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.04% at 1.0301, AUD/USD up 0.09% at 0.9324 and NZD/USD trading up 0.28% at 0.8305.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.05% at 80.32.
On Tuesday, the Institute of Supply Management is to produce a report on manufacturing activity, a leading economic indicator.
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