The U.S. dollar edged higher Monday, rebounding after last week's losses although sentiment remains wary ahead of key inflation data and amid worries over the health of the U.S. regional banking sector.

U.S. CPI data due
The U.S. currency has stabilized on the back of a rebound on Wall Street despite the sudden return of market scrutiny on U.S. regional banks, after two lenders Zions and Western Alliance Bancorp reported problems with loans associated with fraud.

"Concerns about the health of regional banks and the broader quality of credit in the U.S. remain very central for FX markets," said analysts at ING, in a note.

"Indications that lending issues don't extend beyond Zions Bancorp and Western Alliance could offer some further relief to the dollar, but it might not be enough to fully price out concerns about the underlying health of the credit market and have the greenback reclaim all losses."

Elsewhere, the U.S. Bureau of Labor Statistics is expected to publish the delayed September consumer price index on Friday, despite the ongoing U.S. government shutdown.

"We are aligned with consensus in expecting a 0.3% MoM core read which should further endorse a 25bp cut by the Fed next week," said ING. "Barring major deviations from consensus, the inflation release should not have major FX implications, with jobs markets playing a more important role for rate expectations."

Source: Investing.com