The US dollar rose to a 2-year high against the euro this week as investors' expectations for a further monetary easing policy eased, following the Federal Reserve's disappointing minutes of the June meeting.

The minutes showed that among the 12 Fed officials who attended the June meeting, only four mentioned more quantitative easing in their individual forecasts.

The Fed officials also agreed that the US economy continued to expand moderately since the previous meeting, though many noted that a variety of economic indicators showed smaller gains than had been anticipated.

Investors' hopes for another round of its quantitative easing policy were dampened. The dollar rebounded as investors cleared their previous short bets.

Meanwhile, mixed news from Europe continued to weigh on the euro. European Central Bank President Draghi said eurozone leaders had made important progress in reforms aimed at addressing the root cause of the region's debt crisis.

Those steps include increasing sharing of fiscal and financial sovereignty, while calling for a tighter fiscal union.

Meanwhile, European Union finance ministers agreed to give Spain an extra year until 2014 to cut its fiscal deficit to 3 percent of its gross domestic product. Spanish Prime Minister Mariano Rajoy unveiled an additional 65-billion-euro austerity plan in a bid to meet the country's budget targets.

In a surprise development, Germany's Federal Constitutional Court on Tuesday began a hearing into whether the EU bailout scheme and budget rules are compatible with German law. A ruling might take up to three months, which surprised investors who had expected the European bailout fund could become operational in July.

The uncertainties about the bailout process offset the positive news that the EU finance ministers agreed to grant an extra year for Spain to achieve its austerity plan, while the surging yields of Spain and Italy' s government bonds added to investor concerns.

The dollar surged to a 2-year high against the euro on Thursday, lifted by both disappointing news from the Fed and negative news from Europe. The dollar index gained 0.62 percent to 83.328 this week.

On the economic front, the National Federation of Independent Business reported that its US small business optimism index dropped sharply in June for the second straight month, as US small businesses were gloomy about the economic prospect.

The US Labor Department said initial jobless claims dropped by 26,000 to 350,000 last week, the lowest level in four years, suggesting the recovery of job markets began to gain strength.

The Thomson Reuters/University of Michigan Surveys of Consumers preliminary reading on the overall index on consumer sentiment fell to 72.0 from 73.2 in June, lower than previous expectations of 73.4.

Against other currencies, the dollar lost 0.65 percent against the Japanese yen as the Bank of Japan on Thursday kept its key interest rate unchanged at the current range of 0 to 0.1 percent.