Private jobs report buoys dollar

By Lucia Mutikani

NEW YORK (Reuters) - The dollar scaled a one-month peak against a basket of currencies on Wednesday after a robust private jobs report suggested the U.S. labor market remained relatively healthy despite an economic slowdown.

The euro recorded its biggest single-day decline against the dollar since July 2005, with traders saying the market was expecting European Central Bank officials to tone down their rhetoric on inflation after Thursday's policy meeting.

The surprise jump in private-sector employment in the ADP report fanned expectations of an above-forecast nonfarm payrolls report on Friday, prompting the market to trim chances of a 50-basis-point interest rate cut by the Federal Reserve next week.

Worries that the Fed could opt for a deeper cut after the Bank of Canada surprised markets with a rate cut on Tuesday were blamed for the dollar's decline in the previous session.

"We can attribute the dollar's strength today to the ADP report. The sharp upside surprise to the ADP jobs number suggests that we could see a better-than-forecast reading of Friday's nonfarm payrolls number," said Omer Esiner, foreign exchange analyst at Ruesch International in Washington.

"This in turn would lower the risk of a 50-point cut by the Fed on Tuesday. Relative strength in the jobs market here in the U.S. is something that can keep the Fed from cutting rates more aggressively."

In late New York trade, the euro traded 1.1 percent lower at $1.4595, after dipping to a session trough of $1.4592, according to Reuters data.

The New York Board of Trade's U.S. dollar index .DXY, which measures the greenback's value against a basket of six currencies, traded 1.1 percent higher at 76.459, after earlier hitting a one-month high of 76.528.