Dollar gains against euro on ADP data, dips against yen on oil decline

Wed Mar 2, 2016 11:21am EST
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By Sam Forgione

NEW YORK (Reuters) - The U.S. dollar dipped against the yen on Wednesday on concerns over U.S. economic growth but hit a more than one-month high against the euro after strong U.S. private payrolls data supported expectations for higher U.S. interest rates.

The dollar erased gains against the yen after hitting 114.55 yen, its highest level against the Japanese currency in more than two weeks. Analysts said extended declines in oil prices stoked concerns over the U.S. economy and boosted the safe-haven yen.

"We know that the oil price weakness has been associated with concerns on banks, concerns on growth," said Steven Englander, global head of G10 foreign exchange strategy at CitiFX in New York. "This nudges the concerns back a bit more into the picture."

The euro fell to $1.0830, its lowest level against the greenback since Feb. 1, after the ADP National Employment Report showed U.S. private employers added 214,000 jobs in February. That was above economists' expectations for a gain of 190,000, according to a Reuters poll.

Analysts said the private payrolls number extended recent strength in U.S. economic data, including higher-than-expected construction spending and manufacturing data released on Tuesday. It also revived expectations of at least one U.S. Federal Reserve rate hike this year after market turmoil at the start of 2016 caused them to subside.

Such expectations stand in contrast with prospects of looser policies at central banks such as the European Central Bank and Bank of Japan, a trend which is supportive of a stronger dollar.

"You’ve had this divergence trade reasserting itself," Englander said.

Expectations that the ECB will announce an even more stimulative monetary policy at its March 10 meeting contributed to the euro's weakness, although the possibility that this might not happen limited the decline.   Continued...

A boy walks past an exchange bureau advertisement showing images of the U.S dollar in Cairo, Egypt, Feburary 21, 2016. REUTERS/Mohamed Abd El Ghany