The U.S. dollar rose on Wednesday after data showed underlying inflation in the world's largest economy rose in August, reinforcing expectations that the Federal Reserve will likely undertake a smaller rate cut of 25 basis points later this month.

The dollar index gained 0.1% to 101.79 as the euro fell versus the greenback top $1.1005.

The consumer price index grew 0.2% last month after climbing 0.2% in July, data showed. Excluding the volatile food and energy components, the CPI climbed 0.3% in August after rising 0.2% in July.

(Reporting by Gertrude Chavez-Dreyfuss)