* ADP shows private-sector jobs gain lower than expected
* Dollar sluggish as a result; U.S. nonfarm payrolls awaited
* U.S. service sector growth slowest in seven months
* Euro vulnerable before ECB meeting on Thursday
By Gertrude Chavez-Dreyfuss
NEW YORK, April 3 The dollar dropped across the
board on Wednesday after reports showed unexpectedly few jobs
were created in the U.S. private sector and a slower pace of
growth in the services industry, raising concerns that recovery
in the world's largest economy has stalled.
The weaker-than-expected ADP National Employment Report and
soft services sector number followed poor U.S. manufacturing
data on Monday that suggested the economy, which has seen a run
of strong data the last few weeks, has lost some momentum.
The ADP earlier on Wednesday reported an increase of 158,000
jobs in private employment, much lower than the consensus
forecast of 200,000. However, it revised February's number to
237,000 from its initial reading of 198,000, though that did
little to lift sentiment.
Similarly, the Institute for Supply Management said its
services index fell to its weakest since August at 54.4 last
month from 56 in February, falling short of economists'
forecasts of 55.8. The employment component of the index also
"The softer-than-expected figure adds further support to our
long-held view that the US economy would slow towards mid-year,
seeing sub-2 percent GDP growth in the second quarter," said
Andrew Grantham, economist at CIBC World Markets in Toronto.
"This is a negative for stocks and the U.S. dollar, but a
positive for fixed income."
With this run of disappointing data on the U.S. economy,
market participants have become cautious going to Friday's
all-important non-farm payrolls report. Analysts were
forecasting U.S. payrolls hit 200,000 in March, with the
unemployment rate seen holding steady at 7.7 percent.
Kathy Lien, managing director at BK Asset Management in New
York, said the U.S. services sector and ADP numbers do not bode
well for Friday's employment report. "This signals the potential
for a sizable disappointment along with further dollar
The dollar index was last down 0.2 percent at 82.757.
The euro hit session highs against the dollar both after the
ADP and service sector reports and was last at $1.2838,
up 0.2 percent on the day.
Europe's common currency, however, looked vulnerable given a
recent run of weak euro zone data that, when added to political
turmoil in Italy and concerns over Cyprus, could lead European
Central Bank President Mario Draghi to strike a dovish tone
hours in his post-meeting comments on Thursday.
Against the yen, the dollar fell 0.4 percent to 93.02 yen
, hitting session lows of 92.82. The U.S. currency
remained well off a 3-1/2 year high of 96.71 yen set last month.
Analysts said choppy moves in currencies were unlikely
before the end of the Bank of Japan's April 3-4 policy meeting,
in which it is widely expected to ramp up its bond buying and
extend the maturities of the bonds it purchases.
The dollar has climbed around 20 percent against the yen
since November, when markets first started pricing in more
aggressive monetary easing from the BoJ.
As a result of wariness ahead of the meeting long positions
in the dollar versus the yen have likely been pared back over
the past few weeks, traders said. That lighter positioning may
limit the scope of any drop in the dollar after the BoJ's
decision on Thursday.