NEW YORK, Oct. 17-- The U.S. dollar dropped against the euro amid investors' expectation that Spain would ask for a bailout.

During Monday's trading, the euro hit the level of 1.3061, the strongest level since October 5.

The euro has been staying strong recently, supported by speculations that Spain would ask for a financial aid soon, which softened worries over the European debt crisis.

The 17-country common currency gained after media reported that two German lawmakers said Germany was "open to Spain seeking a precautionary credit line."

The dollar weakened after the Labor Department said the consumer price index rose 0.6 percent last month, the same as in August, indicating the country's loose monetary policy may have triggered inflation.

The dollar index, which measures the currency against its counterparts of six U.S. major trader partners, fell 0.4 percent to 79.434 on Tuesday.

In late New York trading, the euro soared to 1.3043 from 1.2941 of the previous trading day, and the British pound rose to 1.6113 dollars from 1.6071.

The dollar fell to 0.9270 Swiss francs from 0.9340 but increased to 0.9871 Canadian dollars from 0.9786.

The dollar bought 78.90 Japanese yen, higher than 78.70 in the previous session