The dollar hit a session high against the Mexican peso on Thursday after Mexico's president, Enrique Pena Nieto, said he would not attend a previously scheduled meeting with Donald Trump.
In a tweet, Pena Nieto said: "This morning we informed the White House that I will not attend a reunion scheduled for next Tuesday" with the U.S. president.
@EPN: Esta mañana hemos informado a la Casa Blanca que no asistiré a la reunión de trabajo programada para el próximo martes con el @POTUS.
Dollar/peso intraday chartSource: FactSet
The greenback also rebounded from a seven-week low, as investor appetite improved with higher global bond yields and stable stock markets around the world, a day after the Dow Jones Industrial Average topped the 20,000 mark for the first time.
In midday trade, the Dow held above 20,000 points and the other main U.S. stock indexes posted minor losses.
"The impression ... is that the Trump reflation trade may be getting back on track," said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto. "The U.S. dollar is benefiting as key short-term yield spreads turn slightly more supportive."
U.S. Treasury yields were a touch higher on the day, while Germany's 10-year bond yields, the benchmark for the euro zone, hit a one-year high of 0.48 percent and France's equivalent hit 1 percent.
While equities and Treasury yields have continued to rise in the past week, fueled by Trump's signals of new public spending, the effect on the dollar over the last two weeks has been mixed. Investors were concerned about other parts of Trump's policy mix such as his leanings toward a protectionist trade policy.
But some downbeat signals out of Japan and another burst higher in U.S. government bond yields were enough to draw buyers back into the greenback.
"We have argued this week could be the moment to start reinstating some long dollar positioning, particularly against the yen, said Kamal Sharma, a strategist with Bank of America Merrill Lynch in London. "There may be a catch-up in the yields in these moves."
Speculators have gradually cut their net bets on a stronger dollar to $24.44 billion in the week to Jan. 17 from $25.43 billion the week ending Jan. 3, data from the Commodity Futures Trading Commission and calculations by Reuters show.
In early afternoon trading, the dollar index was up 0.36 percent at 100.39, having hit a seven-week low of 99.793 in Asian trading.
The dollar trimmed gains against both the yen and euro after a weak set of U.S. economic data, including an increase in initial jobless claims and a fall in new home sales.
Among the group of G10 developed world currencies, the biggest gainer of the past two weeks has been sterling, up almost 6 percent from troughs hit on Jan. 16. On Thursday, sterling was down 0.2 percent at $1.2604, despite a solid reading of Britain's fourth-quarter growth.