By Tommy Stubbington 

The euro tumbled to a one-month low against the dollar as doubts over Greece's ability to repay its debts intensified, while Greek bonds came under renewed pressure.

The common currency fell 0.8% to $1.0885, extending the previous day's declines as markets fully reopened following the long holiday weekend.

The moves came after Athens raised doubts over whether it will have enough money to make payments due to the International Monetary Fund next month. Further complicating negotiations is the struggle within the ruling Syriza party over whether to swallow creditors' tough terms or default.

"Uncertainty around Greece has kept the euro on the back foot," said foreign-exchange strategists at Citigroup.

A broad dollar rally helped to peg back the euro, with the buck touching its highest in nearly eight years against the Japanese yen. Analysts said a recent improvement in U.S. economic data and comments from Federal Reserve Chairwoman Janet Yellen that the central bank is on track to raise interest rates this year were behind the strength.

Investors were awaiting a raft of U.S. economic data, including durable goods orders and new home sales, for the latest clues as to the health of the economy.

In bond markets, Greek two-year yields climbed by 1.3 percentage point to 23.9% amid growing fears over a default. Safe harbor German bonds benefited from the unease, with 10-year yields down 0.06 percentage point at 0.55%. Yields fall as prices rise.

Spanish markets remained under pressure after the strong performance in regional elections at the weekend from two upstart political parties. Spain's 10-year yield climbed 0.08 percentage point to 1.85%.

Spain's IBEX 35 stock index was down 0.6%, having fallen 2% on Monday.

Elsewhere, European stocks were mostly higher. The Stoxx Europe 600 index added 0.3% in early trade. Companies in Europe, which make a big chunk of their revenue overseas, tend to benefit from a weaker currency.

In commodities, Brent crude oil fell 0.6% to $65.13 a barrel, and gold was down 0.8% at $1,195.10 an ounce.

Write to Tommy Stubbington at tommy.stubbington@wsj.com