Dollar retreats as investors eye jobs data, Syria tension

NEW YORK: The dollar fell from a six-week high against major currencies on Wednesday as investors booked profits on its recent gains before jobs numbers due this week.

The dollar’s weakness was most pronounced against growth-linked currencies, with the Australian and New Zealand dollars both rallying more than 1 percent.

Investors are shifting focus to U.S. labor market data, with the ADP private-sector jobs number due out Thursday and the government employment report on Friday. The data will likely help determine whether the Federal Reserve will start reducing its stimulus at its September 17-18 meeting.

“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,” said Charles St-Arnaud, foreign exchange strategist at Nomura Securities in New York.

The dollar index fell 0.3 percent to 82.131, retreating from Tuesday’s peak of 82.516, its highest since July 22.

The euro rose 0.3 percent to $1.3212, gaining for the first time in six sessions. It hit a six-week low of $1.3137 on Tuesday. The euro also gained 0.4 percent to 131.58 yen.

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.

The European Central Bank on Thursday is expected to reaffirm it will keep interest rates low to support the euro zone’s fragile recovery.

That contrasts with the Fed’s plan on moving away from its ultra-loose policy, moving interest rate differentials against the euro.

“If the ECB uses strong language to enforce forward guidance, trying to keep interest rates low, this would be negative for the euro,” said Ulrich Leuchtmann, head of FX research at Commerzbank in Frankfurt.

The dollar rose 0.1 percent to 99.61 yen, giving up most gains after the U.S. Senate Foreign Relations Committee approved a resolution authorizing the use of military force in Syria by a 10-7 vote. The vote clears the way for a vote on the resolution in the full Senate, likely next week.

The safe-haven yen and Swiss franc will likely benefit should an attack against Syria come in the coming days.

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 attack.

But he also said 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.

The Australian dollar gained 1.2 percent to $0.9171. The New Zealand dollar rallied 1.4 percent to $0.7910.

Data showed growth in China’s services sector hit a five-month high, underpinned by new orders and business optimism.

Central banks in Japan and Britain also hold policy meetings this week, while the Group of 20 will meet in St Petersburg, Russia. –REUTERS