Dollar climbs after U.S. services industry data, extends Tuesday's gain

© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Caroline Valetkevitch

NEW YORK (Reuters) -The U.S. dollar index was higher on Wednesday after data showed a surprise pickup in the U.S. services industry in July, which gave the currency further support after hawkish comments from Federal Reserve officials Tuesday.

The Institute for Supply Management said its non-manufacturing PMI rebounded last month from June. The increase ended three straight monthly declines. It also showed supply bottlenecks and price pressures eased, and backed up the view the economy is not in a recession.

The dollar index, which tracks the greenback against six major peers, was last up 0.3% at 106.76. The index had been down slightly heading into the report.

"Yesterday was a big day for the dollar. The Federal Reserve is pushing back on diminishing rate hike expectations, and that's helped to give the dollar a lift," said Adam Button, chief currency analyst at ForexLive in Toronto.

The dollar index, which remains up sharply for the year so far, had eased recently as investors began reassessing how aggressive the Fed may be with rate hikes.

But the greenback rallied on Tuesday after a trio of Fed officials signalled the central bank remains "completely united" on increasing rates to a level that will put a dent in the highest U.S. inflation since the 1980s.

U.S. monthly jobs data due on Friday will also help set the tone for the greenback, analysts said.

Against the yen, the dollar was up 0.9% at 134.43 yen.

The yen's "safe-haven status is eroding," Button said. "The dollar is both the source of growth and the safe haven. That's absolutely super charged dollar gains this year, given the state of monetary policy."

Frictions after the highest-level U.S. visit to Taiwan in 25 years also may help support the U.S. dollar, analysts said. China condemned House of Representatives Speaker Nancy Pelosi's visit and began six days of military drills surrounding Taiwan, as Pelosi hailed the self-ruled island as "one of the freest societies in the world".

The euro reversed earlier gains against the dollar and was last down 0.4% at $1.0127 (EUR=EBS). Reports earlier showed monthly drops in both business activity and retail sales in the euro zone.

Sterling also weakened against the dollar. It was last down 0.4% at $1.2108, ahead of a Bank of England policy meeting on Thursday. It is expected to raise rates for the sixth straight time.

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Currency bid prices at 10:56AM (1456 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

106.7600 106.4400 +0.32% 11.600% +106.8000 +105.9700

Euro/Dollar

$1.0127 $1.0166 -0.38% +0.00% +$1.0212 +$1.0126

Dollar/Yen

134.4250 133.1800 +0.92% +0.00% +134.5400 +132.2950

Euro/Yen

136.14 135.37 +0.57% +0.00% +136.4200 +134.8400

Dollar/Swiss

0.9644 0.9573 +0.75% +0.00% +0.9651 +0.9544

Sterling/Dollar

$1.2108 $1.2158 -0.40% +0.00% +$1.2207 +$1.2105

Dollar/Canadian

1.2880 1.2878 +0.02% +0.00% +1.2892 +1.2833

Aussie/Dollar

$0.6912 $0.6921 -0.14% +0.00% +$0.6946 +$0.6887

Euro/Swiss

0.9767 0.9732 +0.36% +0.00% +0.9783 +0.9725

Euro/Sterling

0.8362 0.8354 +0.10% +0.00% +0.8373 +0.8343

NZ

Dollar/Dollar $0.6231 $0.6255 -0.35% +0.00% +$0.6273 +$0.6214

Dollar/Norway

9.7495 9.7665 -0.16% +0.00% +9.7870 +9.6900

Euro/Norway

9.8750 9.9364 -0.62% +0.00% +9.9477 +9.8586

Dollar/Sweden

10.2518 10.2416 -0.28% +0.00% +10.2689 +10.1849

Euro/Sweden

10.3828 10.4121 -0.28% +0.00% +10.4270 +10.3798