Investors have been short the dollar since July last year, but since mid-February, the dollar index has rallied nearly 7 percent. The dollar has been mainly bolstered by generally solid US economic data that has backed the Federal Reserve's tightening stance this year.

The prospect of a resolution to the US-China trade tension has further added to the dollar's shine.

The two world's largest economies have agreed to drop their tariff threats for now. US Treasury Secretary Steven Mnuchin and President Donald Trump's top economic adviser, Larry Kudlow, said on Sunday the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.

"While there have seemingly been few signs of concrete progress in those negotiations, the more constructive tone from the two sides appears to be lending some support to the risk environment," said Erik Nelson, currency strategist at Wells Fargo Securities in New York.

That news also boosted US equities and Treasury yields, underpinning the dollar as a result.

In mid-morning trading, the dollar index rose 0.1 percent to 93.748 after earlier hitting a five-month high above 94.

This week, the dollar's fate rests on the Federal Reserve, with several Fed officials speaking this week and the minutes of the US central bank's last monetary policy meeting due out on Wednesday.

"If the minutes take note of inflation creeping higher, it could open the door to faster rate hikes and a stronger dollar," said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.

In other currency pairs, the dollar rose to a four-month high against the yen at 111.39 and was last at 111.13, up 0.4 percent. The yen has been pressured by recent weaker Japanese data, a US-China trade war truce and elevated US Treasury yields, analysts said.

The euro, meanwhile, was flat against the dollar at $1.1770 , after earlier falling to its lowest since around mid-November. Europe's single currency has been affected by concerns about political uncertainty in Italy.

This week will bring about a further test for stubborn euro bulls with the release of May flash PMI data on Wednesday where markets will be waiting to see whether the first quarter slowdown in Europe has spilled over to the subsequent months.