By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The dollar traded higher against major currencies Wednesday, playing off data showing that the U.S. private sector shed 22,000 jobs in January and that conditions in the nation's services sector improved modestly last month.
The private report on the health of the services sector fueled hopes that the economy may have added jobs on a net basis last month. The government will report on changes in nonfarm payrolls for January on Friday.
The dollar index (DXY 79.10, +0.09, +0.11%) , which tracks the greenback against a trade-weighted basket of six major currencies, rose to 79.142, reversing an earlier decline and up from a reading of 79.003 late Tuesday.
The euro changed hands at $1.3945, reversing an earlier gain and against $1.3966 in North American trade late Tuesday.
The dollar rose to 90.90 Japanese yen, up from 90.40 yen late Tuesday.
ADP's monthly employment report excludes government workers, making it less attractive as an indicator as opposed to the Labor Department's statistics on, among other things, nonfarm payrolls. Still, the number of jobs lost, according to ADP, was smaller than some analysts had been expecting. See story on ADP jobs data.
"The U.S. dollar has strengthened somewhat in the wake of this morning's slightly stronger-than-anticipated ADP employment report," said Todd Elmer, currency strategist at Citi. " We believe risks are skewed in favor of dollar-positive rises from U.S. yields approaching the release" on Friday. See story on bond market.
"A rise in U.S. yields has the potential to support the dollar as markets increasingly focus on underlying cyclical prospects," which would make the dollar look especially attractive in comparison to the yen, he wrote in a note.
The Labor Department is expected to say Friday that the U.S. economy added 20,000 jobs last month, which would be the biggest gain since 2007.
The dollar remained elevated on Wednesday after the Institute for Supply Management's index on the U.S. services sector rose to 50.5 in January from 49.8 in December, crossing the threshold to indicate expansion in the sector. Economists had forecast a slightly bigger improvement, however.
Meanwhile, trading in the euro keyed on the European Union offer of a qualified endorsement of Greece's plans to close its budget gap. Read about the E.U.'s verdict on Greece's budget plan.
The single currency, under pressure since worries about Greece's debt woes and fiscal problems in other euro-zone countries moved into the spotlight in December, fell to a seven-month low against the dollar last week.
