Investing.com - The dollar pulled away from session lows against the yen on Wednesday after a stronger-than-expected report from the Institute of Supply Management on U.S. service sector activity, while the euro edged slightly higher.
USD/JPY was down 0.39% to 101.24 after falling lows of 100.80 earlier in the session.
The dollar found support after the ISM’s services purchasing managers’ index came in at 54.0 in January, up from 53.0 in December. Analysts had expected the index to rise to 53.7.
The employment component of the index rose to its highest level since November 2010.
The data eased concerns over a possible slowdown in the U.S. recovery after Monday’s ISM manufacturing index showed that activity slumped to a seven-month low in January.
Demand for the safe haven yen continued to be underpinned as investors remained cautious ahead of Friday’s closely watched U.S. nonfarm payrolls report for January, after data released on Wednesday showed that the U.S. private sector added fewer-than-expected jobs in January.
ADP non-farm payrolls rose by 175,000 last month, below expectations for an increase of 180,000.
Friday’s report is expected to show that jobs growth rebounded in January after unseasonably cold weather in December kept gains down to 74,000.
Elsewhere, EUR/USD was up 0.15% to 1.3538. The euro remained supported after encouraging euro zone private sector data for January offset a report showing a sharp fall in retail sales in the region in December.
The final reading of the euro zone composite output index came in at a two-and-a-half year high of 52.9 in January, slightly lower than the preliminary estimate for 53.2, but up from 52.1 in December.
A separate report showed that euro zone retail sales fell at the fastest rate since May 2011 in December. The weak retail sales data added to fears over the threat of deflation in the euro area, ahead of the European Central Bank’s policy meeting on Thursday.
The pound was slightly lower against the dollar, with GBP/USD slipping 0.10% to 1.6307.
Sterling remained weaker after data on Wednesday showed that activity in the U.K.’s dominant service sector slowed unexpectedly in January, but growth remained solid, indicating that the economic recovery is on track.
The U.K. services PMI for January came in at seven-month low of 58.3, down from 58.8 in December. Analysts had expected the index to tick up to 59.0.
The dollar was little changed against the Swiss franc, with USD/CHF dipping 0.06% to 0.9031.
The New Zealand dollar was lower, with NZD/USD down 0.42% to 0.8208. The pair rose to highs of 0.8256 overnight, the strongest since January 29, after data showed that New Zealand''s labor market strengthened in the fourth quarter.
The Australian dollar was almost unchanged near three-week highs, with AUD/USD edging down 0.09% to 0.8917. The Aussie held the previous session’s strong gains after the Reserve Bank of Australia shifted its monetary policy stance away from easing rates on Tuesday.
The Canadian dollar was lower against the U.S. dollar, with USD/CAD rising 0.17% to 1.1100.
In Canada, data showed that building permits issued in December fell by 4.1%. Market expectations had been for an increase of 2.0%.
The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, slid 0.09% to 81.15.
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