FOREX-Dollar extends gains on strong U.S. services and factory data

Tue Aug 5, 2014 4:18pm EDT
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* Dollar index marks new 10-1/2-month peak

* Euro drops to fresh nine-month low vs U.S. dollar

* Greenback hits three-month peak against Canadian dollar

* Swedish crown, sterling jump after high PMI readings (Adds Polish Foreign Minister comment on Ukraine, updates prices)

By Daniel Bases

NEW YORK, Aug 5 (Reuters) - The U.S. dollar extended a broad-based rally on Tuesday after stronger-than-expected economic data, including an 8-1/2-year high in the pace of services sector growth and a bigger-than-expected increase in factory orders.

However, some gains were trimmed back, especially against the yen after reports emerged that Russia had gathered military forces on its border with Ukraine. "These things are being done just to exert pressure. Or to enter," Polish Foreign Minister Radoslaw Sikorski told broadcaster TVN24.

Earlier, European service sector data growth was undermined by a drop in Italy, underlining the fragile outlook for the region. This builds expectations the European Central Bank will pump yet more euros into the financial system to boost growth.

"Generally the dollar started off on a stronger footing this morning and certainly the strengthening of the data has helped that rally," said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.   Continued...