Dollar pivots to gains as equities steady

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The dollar rose on Wednesday as global stock markets steadied and U.S. hiring data encouraged speculation that Federal Reserve policymakers will raise interest rates later this month.

Stock market gains slowed a rush to unwind carry trades that had boosted the safe-haven yen and the low-yielding euro in the past few weeks. Both fell against the dollar on Wednesday.

China's slowing economy and worries about global growth had prompted investors to cut unfavorable bets in the yen and the euro, both of which have been popular for funding trades involving the sale of low-yielding currencies to buy higher-yielding, but riskier, assets.

The dollar index, a measure of six major currencies' value against the greenback, was last up 0.40 percent and had added to gains when ADP reported that U.S. private payrolls increased 190,000 last month.

While that was below economists' expectations for a gain of 201,000 jobs, it was a step up from the 177,000 positions created in July and was followed by revised government data showing nonfarm productivity advanced at its fastest pace in 1-1/2 years during the second quarter.


"The data lean in the direction of a rate hike," said David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut.

The chances of a U.S. interest rate hike this month, which would add to the allure of dollar-denominated assets for investors, had been dulled by a global stock market selloff following weak economic data from China.

The dollar was last up 0.70 percent against the yen at 120.15 yen, firming from a low of 119.225 yen as calm returned to equity markets. Japan's currency jumped about 1.6 percent on Tuesday when global stocks fell sharply.

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Looking ahead to Thursday's European Central Bank meeting, the euro fell 0.7 percent to $1.1240, having rallied 0.9 percent on Tuesday when it rose to $1.1332.

The dollar gained more than 1 percent against the Swiss franc to 0.9691 franc.

The British pound hit its lowest level against the dollar in almost three months as investors bet that the Bank of England will not raise interest rates until well into 2016.

The pound traded as low as $1.5266 against the dollar , its lowest since June 9, and was last unchanged at $1.53.