NEW YORK: The US dollar hovered near its highest against the euro in seven and a half months on Wednesday and hit a nearly two-week high against the yen on expectations of greater monetary policy divergence between the United States and Europe.
U.S. private employers added 217,000 jobs in November, above expectations and the most since June, reinforcing expectations that the Federal Reserve would hike interest rates for the first time in nearly a decade after the U.S. central bank's policy meeting on Dec. 15 and 16.
The data came after a soft inflation reading from the euro zone bolstered bets that the European Central Bank would cut rates deeper into negative territory when it meets on Thursday, weighing on sentiment on the euro.
Anticipated Fed rate hikes are expected to boost the dollar by driving investment flows into the United States. The divergence in monetary policy between the ECB and the Fed boosted the dollar and hurt the euro, said Boris Schlossberg, managing director at BK Asset Management in New York.
"The ADP data confirm that the labor market data in the U.S. is healthy and robust," Schlossberg said. "That puts a December rate hike on track," he said. He also said there would be "massive pressure" on the ECB to expand its stimulus program.
Schlossberg also said an uptick in U.S. Treasury yields after the ADP data helped the dollar gain against the yen.
The euro was last down 0.56 percent against the greenback at $1.05735, near a 7-1/2-month low of $1.05575 hit Monday. The dollar hit 123.555 yen, its highest level against the Japanese currency since Nov. 19.
"Going into the (ECB) meeting, investors are confident that the ECB will not disappoint," said Alvin Tan, currency strategist at Societe Generale.
Investors awaited comments from Fed Chair Janet Yellen for clues on the timing of an interest rate increase. Yellen will speak before the Economic Club of Washington at 12:25 p.m. ET (1725 GMT). She also testifies on the economic outlook before a joint committee of Congress on Thursday.
"Investors will also keep an eye on what Yellen has to say," Tan said.
The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.55 percent at 100.340.
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