By Gina Lee

Investing.com – The dollar was up on Wednesday morning in Asia. Investors now await U.S. inflation data, with bets increasing on strong data that would push the U.S. Federal Reserve to begin asset tapering sooner than expected.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.01% to 93.062 by 12: 28 AM ET (4:28 AM GMT).

The USD/JPY pair inched up 0.09% to 110.66.

The AUD/USD pair edged down 0.12% to 0.7341. Australia’s Westpac consumer sentiment index dropped 4.4% in August compared to the previous month’s 1.5% growth. The NZD/USD pair inched down 0.03% to 0.7005.

The USD/CNY pair inched down 0.05% to 6.4830 and the GBP/USD pair inched down 0.10% to 1.3830.

Investors expect the U.S. currency, already boosted by Fed hints that asset tapering could begin soon, to continue its gains.

"With what we have in hand now, we would expect this pattern of dollar gains to continue," JFD Group head of research Charalambos Pissouros told Reuters, ahead of U.S. inflation data, including core consumer price index, which is due later in the day.

"Another set of extremely high numbers, well above the Fed's objective of 2%, could add to the view that the surge in inflation may not be transitory, and thereby, increase further the chances for an earlier normalization by the Fed," he added.

Although Fed Chairman Jerome Powell has maintained that inflationary pressure is likely to be temporary, some of his colleagues, most recently Chicago Fed Bank President Charles Evans, are starting to disagree. Other officials, including Kansas City Fed Bank President Esther George, will also speak throughout the week.

The continuous uptick in COVID-19 cases globally also remains concerning, with Australia extending a lockdown in Melbourne.

"Investors have to take on board the possibility of news on Fed tapering at a time when COVID is still very apparent in various parts of the world," Rabobank analyst Jane Foley told Reuters.

"The consequence of this is likely to be a firmer dollar," she added, particularly if the euro breaches its 2021 low. The euro traded at $1.1720 against the dollar, early in the Asian session.

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