August 30, 2017 / 2:19 AM / a year ago

Dollar gains on bets ECB could weaken euro, strong U.S. data

NEW YORK (Reuters) - The U.S. dollar rose broadly on Wednesday on speculation the European Central Bank could step in to weaken the euro and after strong U.S. economic data boosted expectations for a solid U.S. jobs report on Friday.

U.S. Dollar and Japan Yen notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration

The euro was on track for its biggest daily percentage drop against the dollar in nearly four weeks, of about 0.7 percent, putting it back below $1.20 after touching a more than 2-1/2-year high of $1.2069 Tuesday EUR=. It last traded at $1.1890.

Analysts said traders were starting to suspect that ECB President Mario Draghi could be growing more concerned about the euro’s rise, despite making no mention of the currency’s strength at a central bank gathering in Jackson Hole, Wyoming last Friday.

Draghi’s omission of commentary on the euro that Friday had contributed to the currency breaking past the critical $1.20 level Tuesday. The euro is up more than 13 percent against the dollar this year.

“We’ve come a long way rather quickly,” said Dean Popplewell, chief currency strategist at Oanda in Toronto, in reference to the euro’s gains this year. He said European economic data had not justified the euro’s appreciation this year.

The ECB is set to hold a policy meeting next week.

The dollar also gained after the Commerce Department said its second estimate of U.S. gross domestic product showed that it increased at a 3.0 percent annual rate in the second quarter, its quickest pace in more than two years.

The ADP National Employment Report showed U.S. private-sector employers hired 237,000 workers in August for the biggest monthly increase in five months, also boosting the greenback and driving expectations for a solid U.S. August non-farm payrolls figure.

The dollar touched a two-week high against the yen of 110.43 yen JPY= after the U.S. data, rising further off a 4-1/2-month low of 108.25 struck Tuesday following North Korea's launch of a ballistic missile over Japan.

The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.7 percent at 92.879 .DXY after temporarily hitting a more than 2-1/2-year low of 91.621 Tuesday.

Economists polled by Reuters expect Friday’s non-farm payrolls report to show U.S. employers added 180,000 jobs in August.

“Even if you have a small positive surprise (in non-farm payrolls), even around 200,000, that may extend the bid tone for the dollar,” said Mazen Issa, senior currency strategist at TD Securities in New York.

Reporting by Sam Forgione; Editing by Cynthia Osterman

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