"Dollar bulls are pinning their hopes on the sweeping tax deal leading to a more rapid pace of interest rate hikes from the Federal Reserve," said Jake Spark, US corporate hedging manager at Western Union Business Solutions, in Washington.

The Republican tax legislation would be the largest change to US tax laws since the 1980s. Republicans want to add $1.4 trillion over 10 years to the $20 trillion national debt to finance changes that they say would further boost the economy.

Talks will begin, likely this week, between the Senate and the House of Representatives, which already approved its own version of the legislation, to reconcile their respective bills.

But Lennon Sweeting, chief market strategist at XE in Toronto, said he expects the dollar's gains to be capped by political concerns in Washington.

Former national security adviser Michael Flynn was the first member of Trump's administration to plead guilty to a crime uncovered by Special Counsel Robert Mueller's investigation into Russian attempts to influence the 2016 US election and potential collusion by Trump aides.

Some market participants were also skeptical about how significant the impact of the tax bill would be on US growth.

Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets in London, said US growth could rise by just 0.2 to 0.3 percent annually, not enough to persuade the Fed to raise rates at a faster pace.

The dollar rose to 113.08 yen, the highest since mid-November, and was last at 112.64, up 0.3 percent.

The euro, meanwhile, also fell against the dollar, down 0.3 percent at $1.1856, pushing the dollar index to trade up 0.3 percent on the day at 93.181

Investors are also focused this week on a key US non-farm payrolls report, with analysts forecasting a 200,000 jobs gain for November versus 260,000 the previous month.

This would be the last employment report before the Fed holds its last policy meeting for the year next week and markets have already priced in a rate hike for that meeting.

However, currency markets expect the Fed to raise rates only slightly more than twice next year. Even though US 10-year US yields were higher on Monday, they remain effectively within a 15 basis-point range over the last two months.