The U.S. dollar drifted higher against its major counterparts during the early European session on Tuesday, after U.S. lawmakers reached a tentative deal on border wall funding in a bid to avoid another government shutdown at the end of this week.

The deal includes $1.375 billion for 55 miles of fencing for a border wall with Mexico.

The agreement must be signed into law by the US president before Friday midnight to prevent another damaging government shutdown.

If approved, the deal would fund all government operations through the end of September.

Hopes that a new round of U.S.-China trade talks would help resolve trade dispute also buoyed sentiment.

Negotiators from the two countries are meeting this week in Beijing, with White House adviser Kellyanne Conway saying President Donald Trump wants to meet Chinese President Xi Jinping very soon.

Two days of high-level talks starting Thursday would involve U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He.

The currency held steady against its major counterparts in the Asian session, with the exception of the yen.

Reversing from its early lows of 1.1290 against the euro and 1.2885 against the pound, the greenback hit a 3-month high of 1.1258 and a new 3-week high of 1.2833, respectively. The next possible resistance for the greenback is seen around 1.11 against the euro and 1.26 against the pound.

The greenback reversed from an early low of 1.0036 against the franc, rising to 1.0079. Next key resistance for the greenback is seen around the 1.02 region.

The greenback hovered at a 1-1/2-month high of 110.65 against the yen and held steady thereafter. On the upside, the greenback is likely to find resistance around the 112.00 level.

Data from the Bank of Japan showed that Japan M2 money stock rose 2.4 percent on year in January, coming in at 1,015.1 trillion yen.

That was in line with expectations and unchanged from the previous month.

In today's events, at 8:00 am ET, Bank of England governor Mark Carney is set to speak about the economic outlook and global trade tensions in London.

Federal Reserve Chair Jerome Powell will give a speech titled "Economic Development in High Poverty Rural Communities" at the Hope Enterprise Corporation Rural Policy Forum in Mississippi at 12:45 pm ET.

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