NEW YORK: The dollar rose on Wednesday after data showed US companies added more jobs than expected last month, boosting some hopes that the health of the world's largest economy was improving.
A separate report showing the vast US services sector gained momentum in September also helped lift the greenback to a two-week high against the yen and buoyed it against sterling and commodity-sensitive currencies from Australia and New Zealand.
Few analysts, though, were ready to say the US job market had improved enough to reduce the jobless rate significantly,. That means the Federal Reserve is likely to flood the market with dollars for years to come, keeping the currency's gains in check.
The ADP National Employment Report showed the private sector added 162,000 jobs last month. The report has proved a poor indicator of late in predicting job gains in the more comprehensive government payrolls report, which is due Friday.
"ADP could foreshadow a good number, but even if we exceed expectations, job creation will still be miserable and will give the Fed plenty of scope to keep easing," said John Doyle, currency strategist at Tempus Consulting in Washington.
The dollar was last up half a percent at 78.51 yen after hitting its highest level since Sept. 19 following the data.
Strategists tied the move partly to Japan's new finance minister saying he was ready to take steps to thwart a strong yen, which has hurt exports and the economy.
Jamie Coleman, currency strategist at Forexlive.com in Boston, cited bankers as he noted an uptick in speculative demand for dollar/yen on an improving technical backdrop.
"It lulls you to sleep when the same person says these things over and over again, but when a new minister comes in, people tend to listen more," Doyle said. He added that he did not see the dollar making a run at the 80 yen level any time soon.
The euro slipped 0.1 percent to $1.2902, as uncertainty grew about whether and when Spain would seek emergency aid to stem its debt crisis. Prime Minister Mariano Rajoy quashed speculation that his government would apply for a bailout as soon as this weekend.
Data suggesting the 17-country euro zone likely fell back into recession in the third quarter also hurt the currency ahead of Thursday's European Central Bank meeting.
EURO GAINS SEEN LIMITED, AUSSIE WILTS
Strategists expect Spain to ultimately request a bailout, which would free the European Central Bank to buy Spanish government bonds to lower the government's borrowing costs. Such a move was expected to spark only mild euro gains.
"The bailout is priced into the market, so an official request would only give the euro a short-term boost rather than see it trend higher against the dollar," said Gareth Sylvester, senior currency strategist at Klarity FX in San Francisco.
Some traders said the currency could soon test $1.2968, a level hit a week ago, before hitting $1.30.
Sterling fell 0.3 percent to $1.6080 ahead of a Bank of England meeting on Thursday.
The Australian dollar fell 0.5 percent to $1.0220, weighed down by stronger US data and a report showing Australia posted its widest trade deficit in 3-1/2 years as falling iron ore and coal prices dented export earnings.
The Aussie was also weighed down by expectations that domestic interest rates will be cut further, after the Reserve Bank of Australia on Tuesday cut its cash rate by 25 basis points to 3.25 percent, the lowest level in three years.
Against the Canadian dollar, the US dollar hit an almost one-month high of C$0.9884, while the New Zealand dollar fell 1 percent to $0.8193.
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