The dollar hit a 3-week low against the euro Tuesday, with the British pound also gaining against the greenback ahead of the U.S. trade-deficit data this week. The euro rose 0.9% against the dollar, last at $1.2163. It reached a high of $1.2203 in overnight trading, the highest level seen since June 21. The euro got a boost on media reports that the central bank of the United Arab Emirates was considering diversifying about 5% of its foreign exchange reserves into euros, given the currency's recent decline. "The UAE only has around $19 billion of reserves in all, but it does appear to be the first time that the [central bank] has discussed diversification," said Bear Stearns chief currency strategist Steve Barrow. Adrian Foster, chief currencies strategist at Dresdner Kleinwort Wasserstein, said speculators were "heavily short" on the euro. "They were looking for downside risk in the euro," he said. Foster said speculators unwinding their positions are behind the rally, pushing the euro higher. The dollar has risen over 11% against the euro and 9% against the yen and British pound since the start of the year. Since hitting a 14-month low of about $1.1866 on July 5, however, the euro has now gained 2.5%.