By Julie Haviv
NEW YORK, Jan 5 (Reuters) - The U.S. dollar rallied on Wednesday and analysts expect it to gain further against other currencies after bullish U.S. data indicated the world's largest economy was on a steady path to recovery.
The greenback was on pace for its biggest one-day gain against the yen in more than three months. Against the euro the dollar's rise was heading for the highest in three weeks. The U.S. data and worries about the ability of some euro zone countries to sell an abundance of debt favored the greenback this week.
The ADP Employer Services report, which showed U.S. private employers added 297,000 jobs in December, further propelled an already rising dollar. The ADP number was the largest increase on record, with data going back to 2000, and far exceeded market expectations for a gain of 100,000.
The pace of private sector jobs growth is key to Federal Reserve monetary policy.
The data raised the stakes for Friday's key U.S. payrolls report, according to Nick Bennenbroek, head of currency Strategy at Wells Fargo in New York.
'Clearly the U.S. non-farm payrolls report is now shaping up as an even more critical event. If that report confirms jobs strength, U.S. yields and the U.S. dollar could remain higher over the near term,' he wrote.
In late afternoon New York trading, the dollar index, which measures the greenback's value against six other major currencies, was up 1.00 percent at 80.237. The dollar surged 1.5 percent against the yen to 83.29 yen.
The euro fell 1.2 percent to $1.3151 after earlier touching $1.3125. Traders were focused on taking out an exotic option at that level, which will expire at 10 a.m. New York time on Thursday (1500 GMT). At the same time, there was buying to keep the euro from falling below $1.3125.
Meanwhile, the dollar's 1.9 percent gain against the Swiss franc was the largest one day advance since June 24, 2009.
'There is a large appetite for the dollar as it is being viewed as the growth currency of choice,' said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
Wilkinson said he expects the euro to fall below $1.30 by the end of the month.
'While core European countries are showing solid growth, there is a lot of baggage attached to that growth and it has the potential to explode on sovereign debt woes,' he said. 'The rise in Treasury yields, meanwhile, should prove to be a tail wind for the dollar.'
U.S. Treasuries' prices plunged. For details, see . Rising yields tend to support the dollar as they reflect stronger growth. They also enhance the attractiveness of some dollar-denominated assets to investors.
A separate report showing the U.S services sector expanded as well in December also lifted the dollar.
For a wrapup of U.S. data click on.
'If, in fact, employment is kicking in, then that would set the tone for self-sustained growth, underpin interest rates and very much underpin the dollar,' said Bob Sinche, global head of FX strategy at RBS Global Banking and Markets in Stamford, Connecticut.
Analysts said the private sector employment report bodes well for Friday's U.S. nonfarm payrolls number, which is expected to show gains of 175,000 overall jobs last month.
'We're definitely back to a 'buy dollar' mentality and the market is looking to take out key support levels for the euro,' said Dean Popplewell, chief currency strategist at OANDA in Toronto.
One of those support levels is the 200-day moving average just below $1.31, which has staunchly supported the euro over the last two weeks and its breach could signal further selling.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Kenneth Barry) Keywords: MARKETS FOREX (julie.haviv@thomsonreuters.com; +1-646-223-6153; Reuters Messaging: julie.haviv.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Jan 5 (Reuters) - The U.S. dollar rallied on Wednesday and analysts expect it to gain further against other currencies after bullish U.S. data indicated the world's largest economy was on a steady path to recovery.
The greenback was on pace for its biggest one-day gain against the yen in more than three months. Against the euro the dollar's rise was heading for the highest in three weeks. The U.S. data and worries about the ability of some euro zone countries to sell an abundance of debt favored the greenback this week.
The ADP Employer Services report, which showed U.S. private employers added 297,000 jobs in December, further propelled an already rising dollar. The ADP number was the largest increase on record, with data going back to 2000, and far exceeded market expectations for a gain of 100,000.
The pace of private sector jobs growth is key to Federal Reserve monetary policy.
The data raised the stakes for Friday's key U.S. payrolls report, according to Nick Bennenbroek, head of currency Strategy at Wells Fargo in New York.
'Clearly the U.S. non-farm payrolls report is now shaping up as an even more critical event. If that report confirms jobs strength, U.S. yields and the U.S. dollar could remain higher over the near term,' he wrote.
In late afternoon New York trading, the dollar index, which measures the greenback's value against six other major currencies, was up 1.00 percent at 80.237. The dollar surged 1.5 percent against the yen to 83.29 yen.
The euro fell 1.2 percent to $1.3151 after earlier touching $1.3125. Traders were focused on taking out an exotic option at that level, which will expire at 10 a.m. New York time on Thursday (1500 GMT). At the same time, there was buying to keep the euro from falling below $1.3125.
Meanwhile, the dollar's 1.9 percent gain against the Swiss franc was the largest one day advance since June 24, 2009.
'There is a large appetite for the dollar as it is being viewed as the growth currency of choice,' said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
Wilkinson said he expects the euro to fall below $1.30 by the end of the month.
'While core European countries are showing solid growth, there is a lot of baggage attached to that growth and it has the potential to explode on sovereign debt woes,' he said. 'The rise in Treasury yields, meanwhile, should prove to be a tail wind for the dollar.'
U.S. Treasuries' prices plunged. For details, see . Rising yields tend to support the dollar as they reflect stronger growth. They also enhance the attractiveness of some dollar-denominated assets to investors.
A separate report showing the U.S services sector expanded as well in December also lifted the dollar.
For a wrapup of U.S. data click on.
'If, in fact, employment is kicking in, then that would set the tone for self-sustained growth, underpin interest rates and very much underpin the dollar,' said Bob Sinche, global head of FX strategy at RBS Global Banking and Markets in Stamford, Connecticut.
Analysts said the private sector employment report bodes well for Friday's U.S. nonfarm payrolls number, which is expected to show gains of 175,000 overall jobs last month.
'We're definitely back to a 'buy dollar' mentality and the market is looking to take out key support levels for the euro,' said Dean Popplewell, chief currency strategist at OANDA in Toronto.
One of those support levels is the 200-day moving average just below $1.31, which has staunchly supported the euro over the last two weeks and its breach could signal further selling.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Kenneth Barry) Keywords: MARKETS FOREX (julie.haviv@thomsonreuters.com; +1-646-223-6153; Reuters Messaging: julie.haviv.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.