Hopes the United States and China were making progress to resolve their trade dispute supported the dollar and trade-exposed Asian currencies on Tuesday, while the Canadian dollar rose as the ruling Liberal Party looked to have won a national election. The volatile pound inched 0.2% higher but stayed a touch below a 5-1/2-month high at $1.2980, with the Brexit project in disarray but traders looking to another crucial parliamentary vote on Tuesday to determine the next step.

China's Vice Foreign Minister Le Yucheng said progress was being made in discussions with the United States and that while both sides respected each other, no problem was beyond resolution. That followed overnight comments from US President Donald Trump, who said work toward ending the trade dispute was going well, while White House adviser Larry Kudlow said tariffs scheduled for December could be withdrawn if progress is made.

"There's been no fresh reason to query the broadly positive mood after the meeting in Washington," said Westpac FX strategist Sean Callow, adding that optimism around a Brexit breakthrough further reinforced the improved sentiment. The dollar was marginally stronger against the Japanese yen , hitting a high for the week of 108.72 per dollar.

It lifted from an overnight two-month low on the euro to steady at $1.1149 and was a shade weaker against a basket of currencies at 97.312. The trade-exposed Korean won hit 1,169.4 per dollar, its highest since July 5. The New Zealand dollar was the biggest gainer in Asian hours, rising 0.3% to a five-week high of $0.6424 as short sellers pared positions. The Australian dollar also hit a five-week peak of $0.6883 though moves were slight and it kept below resistance around $0.6895.

The Canadian dollar - the best performing G10 currency this year - hit a three-month high of 1.3071 per dollar as Prime Minister Justin Trudeau looked on track to retain power in a close-run election. The pound awaits Brexit developments to determine its fate. With just over a week before Britain is due to leave the European Union, Boris Johnson's push to re-run a parliamentary vote he lost on the weekend was rejected.

But he has resolved to press on with seeking to pass Brexit-related laws in parliament on Tuesday, with their progress to determine the timeline. "While markets haven't seen fit to reverse last week's optimism that saw sterling smartly higher they aren't yet prepared to take the pound up to the next level," said National Australia Bank Head of FX Strategy Ray Attrill.