Article Highlights

  • Euro just below more than 2-1/2-year high vs dollar
  • ISM non-mfg index fell to 53.9 in July, vs expected 57.0
  • Sterling falls vs dollar after BoE decision
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The dollar fell against the yen, euro and Swiss franc on Thursday after weaker-than-expected U.S. services sector data worried investors ahead of jobs data and stoked doubts that the Federal Reserve would raise interest rates again in 2017.

A report from the Institute for Supply Management (ISM) showed its non-manufacturing index fell to 53.9 last month from 57.4 in June.

While a reading above 50 in the ISM index indicates expansion in the sector, the figure came in below expectations of economists polled by Reuters for a reading of 57.0.

The non-manufacturing employment index fell to 53.6, below economists’ expectations for a rise to 56.5.

The dollar’s losses against the yen reached 0.7 percent on the day after the data, with the greenback touching a session low of 109.96 yen.

That was still above the than six-week low of 109.91 yen hit on Tuesday.

The euro rose modestly against the dollar and hit a session high of $1.1892, just below Wednesday’s more than 2-1/2-year high of $1.1909.

“With services growth slowing more than expected, it suggests a greater chance of payrolls disappointing tomorrow,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. “That would raise the bar to the Fed raising rates and keep the dollar biased downward.”

Economists polled by Reuters expect U.S. employers to have added 183,000 jobs in July, down from 222,000 in June. Fed funds futures on Thursday implied traders saw a roughly 44 percent chance of a Fed rate hike in December, according to CME Group’s FedWatch tool.

While Thursday’s data dampened expectations for a strong payrolls figure and December Fed rate increase, one analyst said a potential jump in jobs growth could not be ruled out.

“The short-dollar trade is looking a little crowded at these levels, and I think it does set up for a bounce in the dollar if we do get a upside surprise in payrolls,” said Omer Esiner, chief market analyst at Commonwealth FX in Washington.

Sterling slumped as much as 0.8 percent against the dollar to $1.3113 after the Bank of England kept interest rates at a record low on Thursday.

That helped limit losses in the dollar index, which measures the greenback against six major rivals including sterling. The index was last down 0.1 percent at 92.733, holding above a 15-month low touched on Wednesday of 92.548.