The dollar rose to a seven-week high on Wednesday, boosted by optimism about a deal to extend the debt ceiling and avert a U.S. default and amid a round of solid economic data that suggests rate cuts from the Federal Reserve could come later rather than sooner.

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The dollar index, a measure of the greenback's value against six major currencies, climbed as high as 103.12 , its strongest level since late March. It was last up 0.3% at 102.85.

The euro, meanwhile, dropped to a six-week low versus the dollar at $1.0811 . It last changed hands at $1.0838, down 0.2%.

"We're seeing a few factors boost the U.S. dollar today," said Helen Given, FX trader at Monex USA in Washington. "Progress on debt-ceiling talks, stronger-than-expected economic data out of the U.S., and hawkish commentary from a few Fed officials are all providing some strength."

President Joe Biden and top U.S. congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal soon to raise the federal government's $31.4 trillion debt ceiling and avoid an economically catastrophic default.

After a months-long standoff, both political leaders agreed to negotiate a deal directly. An agreement needs to be passed by both chambers of Congress before the federal government runs out of money to pay bills, as soon as June 1.

"The debt ceiling talks seem to be helping the dollar regardless of how they appear to be going," said Joe Manimbo, senior market analyst at Convera in Washington.

"On the one hand, a continued stalemate tends to lend a safe-haven boost to the dollar. While on the other, any constructive tone in negotiations can add to the dollar's renewed popularity."

U.S. data, meanwhile, has been on the whole positive, despite some pockets of slowdown, backing the view that interest rates will remain higher for longer.

Wednesday's data showed U.S. single-family homebuilding increased in April, although data for the prior month was revised sharply lower.

Single-family housing starts, which account for the bulk of homebuilding, rose 1.6% to a seasonally adjusted annual rate of 846,000 units last month. Data for March was revised down to show single-family starts falling to a rate of 833,000 units instead of increasing to a pace of 861,000 units as previously reported.

That followed reports on Tuesday that U.S. retail sales rose in April, although less than expected, with the underlying trend remaining strong.

U.S. industrial production also gained, advancing 1% last month, easily topping expectations and up slightly from the March reading.

"Recent data is painting a more resilient picture of U.S. growth compared to Europe," said Manimbo. "Moreover, elevated inflation and low unemployment on this side of the pond suggest any U.S. rate cuts are likely to materialize later rather than sooner."

In afternoon trading, the dollar rose 0.9% versus the yen to 137.59 yen, after earlier climbing to a two-week peak of 137.625 .

The rate futures market has priced in no chance of a Fed rate cut in June, down from about a 17% probability seen a month ago.

Elsewhere, the Chinese yuan weakened past 7 per dollar on Wednesday for the first time in five months amid geopolitical tensions and more signs of China's post-COVID-19 recovery losing steam.

In the offshore market, the dollar rose 0.1% against the yuan to 7.0077 .