The dollar edged higher on Wednesday, as markets awaited further news on the possible appointment of a hawk as Fed chair and progress on U.S. tax reforms.
The dollar index rose 0.12 percent to 93.38, extending a rebound from Friday's 2 1/2-week low of 92.749. It rose as high as 93.729 on Tuesday.
"The overnight news of progress in negotiations over the new U.S. tax plan seems to be dollar-positive but we have to see some strong economic data before the dollar breaks higher," said Jane Foley, senior FX strategist at Rabobank.
U.S. Senate Republicans on Monday gained crucial support for a vote on a budget resolution that is vital to President Donald Trump's hopes of signing tax reform legislation into law before January.
Morgan Stanley strategists noted the reforms may come at a time when the U.S. has used up all its spare capacity.
Investors also focused on the U.S. Beige Book data, which showed increased economic activist in all 12 Federal Reserve districts.
With the Federal Reserve expected to raise interest rates for the third time this year in December, markets are looking to who will replace Janet Yellen as chair when her term expires in February.
Trump has a pool of five candidates to choose from and is likely to announce his choice before going to Asia in early November, a source familiar with the situation said on Tuesday.
The euro held in a tiny range and was flat against the dollar at $1.1801.