By Gina Lee

– The dollar was up on Monday morning in Asia, with uncertainty surrounding the omicron COVID-19 variant and expectations of more hot U.S. inflation data increasing the pressure on interest rates.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.16% to 96.270 by 11:28 PM ET (4:28 AM GMT).

The USD/JPY pair edged up 0.17% to 113.

The AUD/USD pair was up 0.30% to 0.7022, with the Reserve Bank of Australia handing down its policy decision on Tuesday. The NZD/USD pair was up 0.28% to 0.6758.

The USD/CNY pair edged down 0.11% to 6.3689, while the GBP/USD pair inched up 0.03% to 1.3236.

The riskier Antipodean currencies led an attempted bounce earlier in the session, helped along by preliminary observations from South Africa suggesting that omicron patients had relatively mild symptoms.

However, ANZ Bank analysts suggested, “perhaps we should be looking for volatility rather than a trend." Volatility gauges for the Australian and New Zealand dollars hit their highest in about eight months on Friday.

Omicron has found its way into around one-third of U.S. states. Although research into the variant continues, an article by the South African Medical Research Council said the majority of COVID-19 patients were admitted for other reasons and were oxygen-dependent.

Treasury markets have also been volatile in recent sessions, with the U.S. yield curve flattening sharply over expectations that the U.S. Federal Reserve will move too quickly to curb inflation and eventually impact long-term economic growth.

Friday’s mixed job report also reinforced views of quicker Fed asset tapering. The consumer price index figure due later in the week is also expected to support the view and give the dollar a boost.

Interest rate futures markets have priced U.S. interest rate hikes around mid-2022, but only reaching as high as around 1.5% in late 2026 and investors remain wary of that changing quickly.

"This is a tough one to reconcile. It suggests the market sees the Fed stopping hiking after five hikes, well short of the Fed's median forecasts," Pepperstone head of research Chris Weston told Reuters.

However, a year-on-year inflation print above 7%, against economists' expectations for 6.7%, could change things. "Inflation with a 7 as the big number would get the dollar higher,” said Weston.