* Dollar sticks to six-week high against other major
* U.S. data boosts bets that Fed to taper stimulus in Sept
* Euro under pressure, ECB likely to reaffirm low rates
* U.S. jobs data on Friday could push dollar higher
By Julie Haviv
NEW YORK, Sept 4 The dollar held steady on
Wednesday, hovering near a six-week peak against a basket of
currencies, as encouraging U.S. economic data reinforced
expectations that the Federal Reserve would cut back its
stimulus this month.
The greenback, which gained against the euro for a sixth
straight session, was also sought for its status as a safe-haven
on uncertainty surrounding a possible U.S.-led attack on Syria.
Military strikes on Syria moved a step closer on Wednesday
after Russian President Vladimir Putin signalled a readiness to
drop his opposition if Damascus were proven to have carried out
a chemical weapons attack.
Putin's comments come after U.S. President Barack Obama
clinched the backing of key figures in Congress for his plan to
punish the Syrian government with limited strikes, though no
vote on that proposal is due until next week.
The dollar index was down 0.1 percent at 82.294, but
still close to Tuesday's peak of 82.516, which was its highest
since July 22.
The dollar continuted to be supported by Tuesday's strong
data on the U.S. manufacturing sector that firmed bets the Fed
will begin tapering at its policy meeting on Sept. 17-18, unless
the U.S. payroll numbers due on Friday fall short of forecasts.
"The Fed is likely to taper this month and that is going to
keep the dollar underpinned," said Paul Bednarczyk, head of
research at 4Cast. "Tapering is going to be the first step
towards policy tightening before other major central banks so
people will start buying dollars."
Rising U.S. bond yields have also added to the attraction of
the dollar. The two-year U.S. Treasury note yield was
at 0.43 percent, not far from the 0.442 percent hit on June 26
which was its highest since July 2011.
Meanwhile, data on Wednesday showed the U.S. trade deficit
widened slightly more than expected in July as exports dipped,
but a rebound in imports pointed to some firming in underlying
domestic demand early in the third quarter.
The euro held steady after data showed euro zone businesses
had their best month in over two years in August as orders
increased for the first time since mid-2011.
Other data showed growth in China's services sector hit a
five-month high, underpinned by new orders and business
The euro was flat at $1.3174, not far from
Tuesday's trough of $1.3137, its lowest since late July.
Investors also faced a busy period of potentially market
moving events in the next few days, including a G20 summit in St
Petersburg, policy decisions on Thursday from the Bank of
England, Bank of Japan and European Central Bank, and the U.S.
jobs report on Friday.
Positioning is also favoring the dollar according to Ulrich
Leuchtmann, head of FX research at Commerzbank.
"People have had dollar short positions over recent weeks,
which have become risky ahead of the U.S. jobs report, so some
want to get rid of these. This is also driving dollar strength."
The ECB on Thursday is expected to reaffirm it will keep
interest rates low to support the euro zone's fragile recovery.
This would be in contrast to the Fed's plans on moving away
from its ultra-loose policy, so interest rate differentials will
see the euro slip against the dollar.
"If the ECB uses strong language to enforce forward
guidance, trying to keep interest rates low, this would be
negative for the euro," said Commerzbank's Leuchtmann.
Caution ahead of this week's central bank meetings as well
as the possibility of a U.S. military strike on Syria were
likely to keep major currency pairs in recent ranges.
The dollar was flat against the yen at 99.56 yen,
having tested a one-month high of 99.86 yen on Tuesday.