The dollar rose for a second straight session on Tuesday, a day after posting its biggest daily rise in a week, as the currency continued to benefit from optimism surrounding U.S. tax reform.
"The dollar will stay well-supported until we get some clarification on the tax bill and then we will probably trade off a little bit," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
On Monday, the Republican-controlled House of Representatives voted to go to conference with the Senate on tax legislation, setting up formal negotiations on the bill that could take weeks to complete. The Republican-led Senate is expected to hold a similar conference vote later this week.
In late trading, the dollar index, a gauge of the greenback's value against six major currencies, was up 0.13 percent at 93.31.
Against the yen, the dollar gained 0.10 percent to 112.51 yen .
The euro, meanwhile, was down 0.33 percent versus the dollar at $1.1825. Though the dollar has recovered some poise after falling to a two-month low last week, some market strategists expect further dollar gains next year to be limited, with the euro likely to be the beneficiary.
In a 2018 outlook report published on Tuesday, ING strategists expect the euro to rise to $1.30 against the dollar next year, a level it hasn't traded at since September 2014.
"The euro is in the sweet spot of this global recovery and looks well-positioned for the investment cycle," said Petr Krpata, chief EMEA FX strategist at ING in London.
Meanwhile, sterling trimmed earlier losses to trade 0.25 percent down on the day at $1.3444 as broad disappointment over the lack of a Brexit deal prompted some investors to cut their long bets. It hit an intraday low of $1.3370.
Prime Minister Theresa May failed to clinch a deal on Monday to open talks on post-Brexit free trade with the European Union after a tentative deal with Dublin to keep EU rules in Northern Ireland angered her allies in Belfast.
"I don't think this is a market that is too long sterling, but there definitely has been an increase in the excitement level of late with sterling/dollar staying very close to a nice uptrend over the last several months," said W. Brad Bechtel, managing director, at Jefferies LLC in New York.