The dollar shook off initial weakness to edge higher against a basket of other major currencies on Monday as traders braced for the resumption of deliberations on the U.S. tax plan and the confirmation hearing for Federal Reserve Governor Jerome Powell as the central bank's next chair.
The dollar index, which measures the greenback against six rival currencies, was up 0.12 percent at 92.893, after hitting a nine-week low of 92.496 earlier in the session.
Worries about potential delays in the implementation of tax cuts and the possibility of proposals being weakened have weighed on the dollar in recent weeks.
President Donald Trump was to meet with Senate Republican tax-writers on Monday at the White House to scope out an end-game strategy for sweeping tax legislation, ahead of a crucial vote on the Senate floor that could come as early as Thursday.
On Monday, Trump tweeted that the tax cut bill was 'coming along very well.'
"The dollar has been ultra sensitive to headlines lately," said Lennon Sweeting, chief market strategist at XE in Toronto.
"Trump's tweet earlier today really did provide some trading impetus."
The index, which last week fell nearly 1 percent, was also supported by data which showed U.S. new home sales surged to their highest in 10 years, reinforcing expectations the Federal Reserve will raise interest rates next month and a few more times in 2018.
The dollar was 0.45 percent lower against the yen.
The yen's strength reflected traders' caution ahead of a potentially eventful week, Sweeting said. Japan is the world’s largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis, thus pushing up the yen.
Traders were also focusing on the upcoming change of guard at the Fed as Powell appears before the Senate Banking Committee on Tuesday. Outgoing Chair Janet Yellen appears before the Joint Economic Committee on Wednesday.
Sterling briefly hit an eight-week high before retreating a little as investors consolidated bets ahead of a key European Union summit and against the backdrop of a brewing political crisis in Ireland.
While sterling currency markets, including derivatives, have been largely quiet in the run up to a crunch EU summit on Brexit in mid-December, investors worry the pound will become more vulnerable to political headlines as the date nears.
(Reporting by Saqib Iqbal Ahmed; Editing by Lisa Von Ahn and Chizu Nomiyama)