The dollar rose against a basket of currencies on Tuesday, rebounding from a two-month low hit the previous day, as risk sentiment improved and the confirmation hearing of new Federal Reserve chair Jerome Powell kicked off.
The dollar index, which measures the greenback against six rival currencies, was up 0.34 percent at 93.22. Against the yen, the dollar gained 0.32 percent to 111.44 on reports North Korea fired a ballistic missile.
"The dollar is stronger today on the back of the strong domestic equity market right now," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
"There is a lot of bullishness out there and that's why you are seeing a little bit of a bounce in the dollar," he said.
Traders were also paying close attention to comments from Powell in his confirmation hearing before the U.S. Senate Banking Committee.
The Fed should "respond decisively" to any new economic crisis, Powell said, positioning himself as an heir to the central bank policies of current chair Janet Yellen and her predecessor Ben Bernanke.
"For the most part his prepared remarks painted a similar picture to the outgoing Chair Janet Yellen's monetary policy strategy," Trang said.
"What he is trying to convey is that there is going to be consistency in the transition."
The British pound slipped from a two-month high on Tuesday, having failed to push above $1.34 as Brexit-related doubts began to re-exert their grip on the currency.
"Investors are growing more nervous about possible delays to the Brexit negotiations by the issue of the Northern Ireland-Republic of Ireland border," Omer Esiner, chief market analyst at Commonwealth Foreign Exchange said in a note.
A deal on the Northern Ireland-Irish border, a key part of Brexit talks, has become trickier as the Irish government has been pushed to the brink of collapse.
Sterling was up 0.37 percent at $1.3365.
The Canadian dollar weakened to a one-week low against its U.S. counterpart as oil prices fell.