© Reuters. Dollar index down more than 1% after weak U.S. services data
The dollar extended losses against the other major currencies on Wednesday after data showing that U.S. service sector activity slowed again in January prompted concerns that weakness in manufacturing may be spreading to other sectors.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 1.29% to 97.59.
The drop in the dollar came after the Institute for Supply Management said its non-manufacturing index declined to 53.5 from December's 55.3.
It was the lowest reading since February 2014 and was worse than expectations for a downtick to 55.1.
The report came after a separate survey by Markit also showing that U.S. service sector activity grew more slowly in January, indicating that the economy may be losing momentum.
The report overshadowed better-than-expected data on U.S. private sector hiring.
Payrolls processor ADP reported that the U.S. private sector added 205,000 jobs last month, beating economists' forecasts for an increase of 195,000.
Markets use the ADP data as a guide for the Labor Department’s employment report, which will be released Friday and covers both government and private sector jobs growth.
Economists expect Friday's report to show that the U.S. economy created 190,000 jobs last month, after an increase of 292,000 in December.
Doubts over slowing U.S. growth and how much the Federal Reserve can raise rates this year pressured the dollar lower.
USD/JPY extended early losses, tumbling 1.71% to 117.89.
The low yielding euro also strengthened, with EUR/USD advancing 1.26% to 1.1055.
The dollar was also sharply lower against the pound and the Swiss franc, with GBP/USD climbing 1.27% to 1.4593 and USD/CHF down 1.09% at 1.0074.
The currencies of commodity producing countries added to earlier gains made on the back of a recovery in oil prices.
AUD/USD was up 0.99% to 0.7107, recovering after steep falls in the previous session, while USD/CAD was down 1.38% to one-month lows of 1.3861.
NZD/USD rallied 2.14% to 0.6653 after better-than-forecast domestic jobs data was seen as .diminishing the chances of a rate cut by the country’s central bank.
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