The dollar stood atop large gains early on Friday after soaring broadly overnight on comments by US President Donald Trump that he would announce the most ambitious tax reform plan since the Reagan era in the next few weeks.
The dollar had enjoyed a big surge after Trump won the US elections in November on pledges to inject the economy with large-scale fiscal stimulus. But the "Trump rally" had faded over the past few weeks with more focus on the new president's protectionist trade rhetoric and his support for a weaker dollar.
The dollar index against a basket of major currencies was up 0.1 per cent at 100.710, its highest in three days. The index was poised to rise 0.8 per cent on the week.
The US currency received a boost as Trump promised a "phenomenal" tax plan in a White House meeting on Thursday with airline executives, although he did not offer specifics other than citing the need to a lower tax burden on businesses.
The euro was steady at $1.0657 after losing 0.4 percent the previous day. The common currency was on track to shed more than 1 percent on the week, during which it was dogged by perceived political risks facing the euro zone.
The dollar extended its overnight rally and edged up to a nine-day high of 113.665 yen.
The greenback soared 1.2 per cent against the yen the previous day as US Treasury yields rose sharply in the wake of Trump's comments. Treasury yields had until Thursday declined steadily to multi-week lows, pushing the dollar to a 10-week trough of 111.590 yen.
"Recently, the dollar has been caught between uncertainty towards Bank of Japan policy and US-Japan currency diplomacy on one hand, and hopes for US tax reform on the other. The dollar's surge was straightforward reaction to developments in the latter," said Shusuke Yamada, chief Japan FX strategist at BOA Merrill Lynch.
Market focus turned to the two-day summit between President Trump and Japanese Prime Minister Shinzo Abe starting later on Friday.
Of concern to rejuvenated dollar bulls is the possibility of Trump reiterating his opposition to a strong dollar, and the financial markets are paying particular attention to how much currency policies are discussed at the summit.
Trump and his top trade adviser Peter Navarro criticised Germany, Japan and China last week, saying the trading partners were engaged in devaluing their currencies to the disadvantage of the United States.
"Currency policy may not be a dominant topic at the summit, and that would be positive for the dollar," Yamada at BOA Merrill Lynch said.
A senior US official said while currency manipulation could come up in the talks, it was not at the top of Trump's list of topics at the summit.
Elsewhere, the New Zealand dollar inched up 0.1 per cent to $0.7189, stabilising somewhat after sliding 1.1 per cent the previous day as the country's central bank extinguished hopes that a rate hike would happen sooner rather than later.