By Gina Lee

Investing.com – The dollar was up on Friday morning in Asia ahead of the release of U.S. inflation data. The British pound was down, but a near three-month high, as expectations that the Bank of England could hike its interest rate earlier than planned grow.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.12% to 90.065 by 1:21 AM ET (5:21 AM GMT).

The GBP/USD pair inched down 0.08% to 1.4194.

The USD/JPY pair inched up 0.08% to 109.88. The dollar broke out of its tight range against the yen over the past few weeks to reach its highest levels in about seven weeks. The jump likely reflected yen selling due to MSCI's reshuffle of its standard stock index, from which nearly 30 Japanese names were dropped, according to some investors.

The yen was also hampered by investors' concerns about a delay in Japan's economic recovery as Japan seeks to extend a state of emergency covering Tokyo and other key areas by three weeks to Jun. 20.

The AUD/USD pair inched up 0.06% to 0.7744 while the NZD/USD pair was down 0.27% to 0.7271.

The USD/CNY pair was down 0.22% to 6.3686. The offshore Chinese yuan hit a three-year high of 6.3679 as investors expect that the People’s Bank of China will welcome a stronger currency during its continuous economic recovery from COVID-19.

Bank of England policymaker Gertjan Vlieghe said the central bank could possibly hike interest rates well into 2022, adding that the move could come faster than expected if the economic recovery is quicker than expected.

The pound also traded at 85.83 pence against the euro, near a five-week high of 85.615 pence. Meanwhile, the euro reached $1.2192, remaining below its five- and-half-a-month high on Tuesday as European Central Bank officials made dovish comments ahead of a policy meeting on Jun. 10.

The dollar jumped as U.S. President Joe Biden will reportedly propose a $6 trillion budget for 2022 on Friday as the country continues its economic recovery from COVID-19.

Also giving the greenback a boost was Thursday’s positive employment data. The number of initial jobless claims filed for the past week in the U.S. dropped to 406,000, a 14-month low.

"The initial claims figure we just saw was pretty good, so obviously expectations are building up for a strong reading on the monthly payrolls data due next week," Daiwa Securities senior currency strategist Yukio Ishizuki told Reuters.

Investors await the Core Personal Consumption Expenditure Price Index for April, due later in the day, amid concerns that a higher-than-expected figure could force the U.S. Federal Reserve to tighten its monetary policy.

Although the reading is expected to be higher than Fed’s 2% target, core inflation is expected to gradually slow later in 2021, allowing the Fed to keep its current dovish monetary policy unchanged for now.

On the cryptocurrency front, bitcoin traded at $38,094, remaining relatively stable during the past 24 hours. Ether traded at $2,732.

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