* Dollar falls from six-week high against other major
* U.S. data boosts bets that Fed to taper stimulus in
* ECB seen likely to reaffirm low rates
* U.S. jobs data on Friday could push dollar higher
By Julie Haviv
NEW YORK, Sept 4 The dollar dropped against the
euro on Wednesday for the first time in six sessions and
retreated from a six-week high against a basket of currencies as
data reflecting a growing world economy boosted investors' risk
After notching significant gains in recent days, the
greenback's weakness was the most pronounced against
growth-linked currencies, with the Australian and New Zealand
dollars both rising more than 1 percent.
While the greenback remains widely sought for its status as
a safe haven amid uncertainty surrounding a possible U.S.-led
attack on Syria, investors opted to book profits ahead of
Friday's key U.S. nonfarm payrolls report.
Strong August job gains will cement expectations that the
Federal Reserve will announce plans to trim its stimulus when it
meets later this month, which should buoy the dollar.
"The trade data today was not super supportive of the
dollar, but today's price action was mostly flow driven and
people are taking profits after the dollar's recent strong run,"
said Charles St-Arnaud, foreign exchange strategist at Nomura
Securities in New York.
"While we are still expecting the Fed to announce plans to
taper this month, there is still some uncertainty headed into
Friday's jobs data," he said.
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 dollar index, which is strongly correlated with
U.S. 10-year Treasury yields, was down 0.3 percent at 82.084,
below Tuesday's peak of 82.516, its highest since July 22.
The dollar last traded up 0.1 percent at 99.64 yen,
according to Reuters data.
The possibility of military strikes on Syria was seen moving
a step closer early on Wednesday after Russian President
Vladimir Putin signaled a readiness to drop his opposition if
Damascus were proven to have carried out a chemical weapons
But he also said later on Wednesday the U.S. Congress had no
right to approve the use of force against Syria without a
decision from the U.N. Security Council, and that doing so would
be an "act of aggression."
Putin's comments came after U.S. President Barack Obama
clinched the backing of key Republican leaders in Congress for
his plan to punish the Syrian government with limited strikes,
though no vote on any such proposal is due until next week.
Investors bought the euro, which hit its cheapest level
against the dollar since late July in the previous session,
after data showed euro zone businesses had their best month in
over two years in August as orders increased for the first time
Other data showed growth in China's services sector hit a
five-month high, underpinned by new orders and business
The euro was last up 0.3 percent at $1.3214, far
above Tuesday's trough of $1.3137, its lowest since late July.
Strong data in the U.S. manufacturing sector on Tuesday
firmed bets the Fed will begin tapering stimulus at its policy
meeting on Sept. 17-18, unless the U.S. payroll numbers due on
Friday fall short of forecasts.
Investors also faced a busy period of potentially market
moving events in the next few days, including a Group of 20
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 in Frankfurt.
"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 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.