* ADP shows private-sector jobs gain lower than expected
* Dollar sluggish as 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 the U.S. private sector
created fewer jobs than expected and the pace of growth in the
service sector slowed last month, raising concerns that a
recovery in the world's largest economy has stalled.
The weaker-than-expected ADP National Employment Report and
soft service sector number followed a poor U.S. manufacturing
reading on Monday that suggested the economy, which has seen a
run of strong data the last few weeks, has lost some momentum.
As a result, the dollar index has struggled this
week, falling 0.6 percent. It last traded down 0.3 percent on
the day at 82.701.
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 weakness," she said.
ADP earlier on Wednesday reported an increase of 158,000
jobs in private employment, well below the consensus forecast of
200,000. It also revised up February's jobs number to 237,000
from an initial reading of 198,000, though that did little to
Similarly, the Institute for Supply Management said its
services index last month fell to its weakest since August, and
was short of economists' forecasts.
The employment component of the ISM index also dropped,
causing nervousness going into Friday's U.S. non-farm payrolls
report. Still, not many analysts have revised their payrolls
"The ADP has missed non-farm on average by 40,000 the last
five times," said Camilla Sutton, chief currency strategist, at
Scotiabank in Toronto.
"I think we have lots of relatively good signs for the U.S.
economy and that employment will not disappoint on Friday.
Scotiabank has an estimate of 210,000 - no change with the data
this week," she said.
Analysts were forecasting U.S. payrolls to hit 200,000 in
March, with the unemployment rate seen holding steady at 7.7
The euro hit session highs against the dollar after the ADP
and services sector reports and was last changing hands at
$1.2848, up 0.2 percent on the day.
But the euro zone's common currency looked somewhat
vulnerable given a recent run of weak data that when added to
political turmoil in Italy and concerns about Cyprus, could lead
European Central Bank President Mario Draghi to strike a dovish
tone in his post-meeting comments on Thursday.
Against the yen, the dollar fell 0.5 percent to 92.94 yen
, hitting session lows of 92.82. The U.S. currency
remained well below a 3-1/2-year high of 96.71 yen set last
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.