NEW YORK- The U.S. dollar edged higher against a basket of currencies on Thursday, after data showed producer prices posted their largest annual increase in more than a decade in the 12 months through July, suggesting inflation pressures remain strong.

The dollar index, which measures the greenback against a basket of six rivals, was 0.083% higher at 92.97.

U.S. producer prices increased more than expected in July, a Labor Department report showed on Thursday, suggesting inflation could remain high as strong demand fuelled by the recovery continues to hurt supply chains. 

The producer price index (PPI) for final demand increased 1.0% last month after rising 1.0% in June. In the 12 months through July, the PPI jumped 7.8%, a record high since the measure was introduced just over a decade ago.

Separately, data showed the number of Americans filing claims for unemployment benefits fell again last week as the economic recovery from the COVID-19 pandemic continued.

Investors remain vigilant for any signs of inflation running too hot since it could potentially spur the Federal Reserve to pull forward its timing on tapering of asset purchases as well as interest rate hikes.

"A strengthening job market and historically high inflation is a recipe for a stronger dollar," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The greenback has broadly strengthened since mid-June - hitting its highest since April 1 at 93.195 prior to Wednesday's data - when the U.S. Federal Reserve flagged that it was gearing up for earlier-than-expected rate hikes and amid evidence that the release of pent-up demand in a rebounding economy was fuelling price rises.

Thursday's data helped the greenback shake off some of the weakness from the prior session when data showed U.S. consumer price increases slowed in July, easing concerns the Federal Reserve will imminently signal a scaling back of bond purchases.

"Today's huge upside PPI surprise follows yesterday's solid but moderating CPI gains, leaving a mix that will keep inflation concerns alive even as economists will continue to expect a slowing in monthly price gains into year-end," Action Economics' Mike Englund and Kim Rupert said in a note.

Sterling was down 0.2% on the day against the U.S. dollar as analysts expected the Bank of England to make no moves in its monetary policy after official data showed Britain's economy grew in line with expectations in the second quarter. 

Bitcoin slipped 2.5% to $44,394.44, a day after touching a near 3-month high.

(Reporting by Saqib Iqbal Ahmed and Iain Withers, additional reporting by Kevin Buckland in Tokyo; Editing by Gareth Jones and Mark Potter) ((Iain.withers@tr.com))