Dollar at One-Month High Against Yen -- Update

By Chelsey Dulaney

The dollar rose to a one-month high against the Japanese yen Wednesday, after strong U.S. service-sector data.

The dollar recently was up 0.6% to Yen103.54, on track for its seventh consecutive session of gains. The WSJ Dollar Index, which measures the U.S. currency against 16 others, essentially was flat as the dollar slipped against the British pound and many emerging-market currencies.

The Institute for Supply Management's nonmanufacturing index rose to 57.1 in September from 51.4 in August, beating economists' expectations. The gauge of the U.S. service sector was at its highest level in nearly a year in September, a sign of steady growth for a key segment of the economy.

"Markets are regaining some confidence in the U.S. economy," said Vassili Serebriakov, an FX strategist at Crédit Agricole.

The dollar has been particularly strong against the Japanese yen recently, likely because investors have been forced to unwind big bets that the dollar will fall against the yen, Mr. Serebriakov said.

"The caution around the U.S. economy, the disappointing data we got a month ago was built into positioning on dollar/yen," said Mr. Serebriakov. "They got caught wrong-footed by some of that U.S. data."

Separately, a report from Automatic Data Processing Inc. on Wednesday showed that private U.S. employers added 154,000 workers in September, below the 173,000 additions that economists had expected.

The data comes before Friday's U.S. nonfarm payrolls report, viewed by many as the best read on the health of the labor market. Investors are watching this week's data and commentary from Fed officials for clues on the path of U.S. interest-rate increases.

The Fed held rates steady at its meeting in September but said the case for raising rates this year has strengthened.

Fed-funds futures, used to bet on central-bank policy, on Wednesday showed that investors assigned a 60% likelihood to a rate increase in December, compared with 63% the previous day, according to CME data.

Higher rates tend to boost the dollar by making it more attractive to investors seeking yield.

The dollar was lower against many commodity-linked currencies as oil prices rose. The dollar fell 0.5% against the Russian ruble and 0.1% against the Canadian dollar.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

October 05, 2016 17:19 ET (21:19 GMT)

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