Dollar at One-Month High Against Yen

By Chelsey Dulaney 

The dollar rose to a one-month high against the Japanese yen on Wednesday, after strong U.S. service-sector data.

The dollar was recently up 0.6% at Y103.515, on track for its seventh consecutive session of gains. The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.2% to 87.21.

Meanwhile, the euro was down 0.1% to $1.1198, while the British pound edged up 0.1% to $1.2736 after falling to a fresh 31-year-low on Tuesday.

The Institute for Supply Management's service-sector index rose to 57.1% in September from 51.4% in August, a sign of steady growth for a important segment of the economy. Economists surveyed by The Wall Street Journal had expected a September reading of 53%.

"Markets are regaining some confidence in the U.S. economy," said Vassili Serebriakov, an FX strategist at Crédit Agricole.

The dollar has been particularly strong against the Japanese yen recently, likely because investors have been forced to unwind big bets that the dollar will fall against the yen, Mr. Serebriakov said.

"The caution around the U.S. economy, the disappointing data we got a month ago was built into positioning on dollar/yen," said Mr. Serebriakov. "They got caught wrong-footed by some of that U.S. data."

Separately, a report from Automatic Data Processing on Wednesday showed private U.S. employers added 154,000 workers in September, below the 173,000 additions economists had expected.

The data comes ahead of Friday's U.S. nonfarm payrolls report, viewed by many as the best read on the health of the labor market. Investors are watching this week's data and commentary from Fed officials for clues on the path of U.S. interest-rate increases.

The Fed held rates steady at its meeting in September but said the case for raising rates this year has strengthened.

Fed-funds futures, which are used to bet on central-bank policy, showed investors assigned a 65% likelihood to a rate increase in December, edging up from 63% the previous day, according to CME data.

Higher rates tend to boost the dollar by making it more attractive to investors seeking yield.

Still, the U.S. currency was lower against many emerging-market currencies, which often are pressured by expectations for higher U.S. rates. The dollar fell 0.3% against the South African rand and 0.5% against the Brazilian real.

Write to Chelsey Dulaney at [e-mail]

(END) Dow Jones Newswires

October 05, 2016 11:08 ET (15:08 GMT)

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