The US currency had jumped to a two-week high against the safe-haven Japanese yen in Asian trading.
The euro held steady versus the dollar even though the mood among German consumers rose unexpectedly heading into December, suggesting that household spending will continue to prop up growth in Europe's biggest economy at the end of the year.
Chinese Vice Premier Liu He, US Trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin discussed issues related to phase one of a trade agreement and agreed to maintain communication on remaining issues.
On Monday, China's Global Times said the two countries were very close to a phase-one deal.
The dollar was last trading neutral at 108.98 yen, after rising as high as 109.205, its highest since Nov. 12.
The euro was also flat versus the dollar at $1.1017 , not far from the 11-day low of $1.1004 it reached on Monday.
Prices in the derivatives market showed that market participants do not expect big moves in the common currency.
One-month euro/dollar implied volatility has fallen to 4.15/4.40pc, the lowest in five years. Three-month volatility fell to a record low of 4.4/4.6pc, suggesting traders do not see the main currency pair diverging from current levels.
The Chinese yuan - the currency most sensitive to the US-China trade war - had risen to a one-week high of 7.0181 against the dollar, but was last trading at 7.0399.
"China and US agreed on a framework to resolve their phase-one issue, which is just a way of saying that they did admin work," said Sebastien Galy, senior macro strategist at Nordea Asset Management.
The next deadline for market participants to watch is Dec. 15, according to analysts.
That is when the US threatened to impose 15pc tariffs on $160 billion of imports from China.
Last week, the Chinese government invited Lighthizer and Mnuchin to Beijing for face-to-face talks, the Wall Street Journal reported.
However, MUFG analysts believe that dollar/yen does not hold much upside potential going forward given the the 10-year US Treasury bond yields have fallen to around 1.75pc from 1.97pc earlier this month.
"It continues to suggest that further upside for USD/JPY in the near-term will prove more challenging especially as global yields have already lost upward momentum," MUFG analysts said in a note to clients.
Overall, currency trading is slowing before the US Thanksgiving holiday on Thursday, with traders increasingly pricing in tighter trading ranges for major currencies, based on implied volatilities.
The dollar/yen's three-month volatility stood at 4.775/5.025pc, the lowest since late April and near its historical lows above 4pc. Three-month volatility on the Australian dollar dropped to a five-year low of 6.12/6.42pc.