FOREX-Dollar buoyed by private sector jobs data, Fed minutes eyed

Wed Jan 8, 2014 9:50am EST

Related Topics

* U.S. dollar helped by strong private sector jobs data

* Swedish crown and Canadian dollar slump

* Fed minutes later in session, ECB meeting on Thursday are factors

* Focus on U.S. jobs data on Friday

By Julie Haviv

NEW YORK, Jan 8 (Reuters) - The dollar gained against a basket of currencies on Wednesday as a better-than-expected data gauging U.S. private sector jobs growth suggested recovery in the world's largest economy gained traction at the end of last year.

U.S. private employers added 238,000 jobs in December, more than expected and the best reading in 13 months, a report by a payrolls processor showed on Wednesday. ADP's National Employment Report also revised November's job gains higher.

"It was without a doubt good report," said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

"The ADP report is doing a much better job at predicting the Labor Department's number for nonfarm payrolls, so this data will undoubtedly change forecasts for Friday's release," he said.

The ADP report comes two days ahead of the government's nonfarm payroll report, a measure of the labor market that is more comprehensive and includes both public and private sector employment.

Analysts are looking for 196,000 jobs to have been added in December, along with a rise in private payrolls of 195,000. Friday's report may provide more clues as to how quickly the U.S Federal Reserve will cut back on its bond-buying program this year.

Minutes from the Fed's December meeting, at which the U.S. central bank announced its decision to begin trimming its stimulative monthly bond purchases, will be released later on Wednesday.

In early New York trade, the dollar rose 0.1 percent to 104.74 yen, down from an earlier high of 105.12 yen, but above Monday's two-week low of 103.88. Last week the dollar reached a five-year high of 105.44 yen.

Against a basket of six major currencies, the dollar reached a six-week high of 81.048 and was last up 0.1 percent on the day at 80.934.

The dollar also firmed against the euro, with the single currency last trading 0.1 percent lower at $1.3504.

Dealers said trade was slowing somewhat ahead of the publishing of minutes from the last meeting of the U.S. Federal Reserve later on Wednesday, which will be scrutinized for signs of how long the central bank will keep interest rates at record lows.

"We think there may be some more room for the dollar to rise tonight after the minutes," said Michael Sneyd, currency strategist with BNP Paribas in London.

"Beyond that we are looking for an inflationary number on payrolls which should support the Fed plan for tapering (of monetary stimulus) ... and a stronger dollar."

He said BNP has a forecast of 215,000 new jobs created by the world's biggest economy in December.

Action in European trade centered around the Swedish crown, hurt by minutes from the central bank's last meeting that were read as leaving room for more cuts in interest rates.

The Swedish central bank's emphasis on macroprudential measures to deal with the effects of household debt was read as leaving the door open to another cut in interest rates. Minutes from the bank's last meeting also showed that two members supported a bigger cut in rates last month.

The dollar last traded 0.7 percent higher at 6.5594 crown. The euro traded 0.6 percent higher at 8.9227 crown.

BNP's Sneyd said he had expected the minutes to head off the prospect of another hike and the lack of such as message had hurt the crown.

"Markets had expected the door would be closed," he said. "Overall these minutes looked very dovish. They look very sensitive to any downside risk (on the economy)."

The Canadian dollar slid after a survey of Canada purchasing managers came in lower than expected and the trade deficit proved bigger than forecast on Tuesday.

That lifted the U.S. dollar to C$1.0828, its highest since May 2010. It was last up 0.3 percent at C$1.0804, according to Reuters data.

Comments by Bank of Canada chief Stephen Poloz that it should keep its key interest rate on hold until data persuaded it otherwise also weighed on the currency.

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