The US dollar edged higher on Wednesday, supported by renewed tensions in the Gulf region, while markets focused on upcoming US economic data for clues about the Federal Reserve's monetary-policy path.

The US Dollar Index, which measures the currency against a basket of six major peers, rose 0.1% to 99.85.

Investors tend to buy the dollar as a safe-haven asset when concerns increase over the economic fallout from the energy shock caused by the war with Iran.

Analysts said the weak US jobs data released last Friday did not put significant pressure on the dollar, as markets expect inflation to be the decisive factor in determining the Federal Reserve's next move on interest rates.

Chicago Federal Reserve President Austan Goolsbee reinforced that view on Tuesday, saying he was more concerned about rising inflation than weakness in the labor market.

Inflation data

Economists expect data due later in the session to show that inflation accelerated last month after easing in June, when oil prices fell amid hopes of a peace agreement between the United States and Iran.

The main focus for markets this week is US inflation data, as investors look for further indications about the direction of interest rates following last week's weaker-than-expected US jobs report.

A press conference by Federal Reserve Chair Kevin Warsh last month also failed to dispel uncertainty over the next steps for monetary policy.

Fed funds futures indicate a 50% probability that the central bank will leave interest rates unchanged at its two-day meeting ending September 16, according to CME Group's FedWatch Tool.

Yen watches for diverging interest-rate paths

US Treasury yields and any further reduction in market bets on Federal Reserve monetary tightening will be crucial factors in supporting the yen, while a Bank of Japan rate hike in September would reinforce the central bank's commitment to monetary-policy normalization.

Market pricing points in the same direction, with Japanese government bond yields rising as expectations grow that the Bank of Japan will raise interest rates next month.

The yen weakened 0.05% against the dollar to 159.38 per dollar, reaching its weakest level in a month despite the recent joint intervention by US and Japanese authorities to support the Japanese currency.