Article Highlights

  • U.S. ADP report shows jobs gain of 253,000
  • U.S. weekly jobless claims rise more than expected
  • U.S. construction spending falls, manufacturing up slightly
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The dollar rallied on Thursday after a report showed the U.S. economy created more private sector jobs than expected in May, bolstering expectations for an interest rate hike this month.

The U.S. unit hit session highs against major currencies such as the yen, euro, and Swiss franc following the jobs report, although it already traded higher ahead of the data.

The private sector employment report by payrolls processor ADP showed employers added 253,000 jobs last month. Economists surveyed by Reuters had forecast jobs gain of 185,000.

Other U.S. economic reports on were mixed, with U.S. jobless claims rising to 248,000, construction spending falling 1.4 percent, and the Institute for Supply Management’s manufacturing index gaining slightly to 54.9.

Interest rate futures after all the data priced in a 91 percent chance the Federal Reserve would hike rates in June. That was down a little bit from the previous day.

The dollar index was last up 0.3 percent at 97.18

“There’s still a lot of room to grow in the dollar,” said Toronto-based Lennon Sweeting, chief market strategist, at forex and payments company XE.

“U.S. data expectations right now are pretty lofty. But as data continues to disappoint, expectations could shift and there would be opportunities for the data to surprise on the upside, which should lead to modest growth for the dollar.”

In late trading, the dollar rose 0.5 percent to 111.29 yen , while the euro fell 0.2 percent to $1.1214.

But the dollar’s performance was overall disappointing so far this year, with the index down nearly 5 percent.

Some analysts were also skeptical about the ADP figures.

“Take this morning’s estimate from ADP…with a huge grain of salt,” said John Herrmann, rates strategist at MUFG Securities Americas in New York.

If the ADP’s estimate of 253,000 jobs gained on a seasonally adjusted basis were accurate, then on a non-seasonally adjusted basis, the raw gain in private payrolls in May would have to be 996,000 jobs based on MUFG’s models.

“Such a 996,000 month-on-month gain would be the third strongest May monthly gain in history.”

Hermann said that kind of private jobs gain was unrealistic.

Investors are now focused on Friay’s U.S. non-farm payrolls report, with a Reuters poll showing a forecast of 185,000 in May.

James Chen, head of reasearch, at in Bedminster, New Jersey said he expects a strong jobs report on Friday that would reinforce a Fed rate hike this month.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci and Chizu Nomiyama)