Dollar Extends Gain After ADP Private Sector Payrolls, Trade Data

Washington (Jan 7)   The US dollar extended advance against its major rivals on Wednesday, after reports showed that ADP private sector jobs growth exceeded estimates in December and US trade deficit narrowed in November, ahead of the FOMC minutes due later in the day.

Private sector employment in the US increased by somewhat more than expected in the month of December, report released by payroll processor ADP showed.

ADP said the private sector added 241,000 jobs in December following an upwardly revised increase of 227,000 jobs in November.

Economists had expected private sector employment to increase by about 235,000 jobs compared to the addition of 208,000 jobs originally reported for the previous month.

 The Commerce Department  released a report showing that the US trade deficit narrowed more than expected in the month of November.

The report said the trade deficit narrowed toUSD39.0 billion in November from a revisedUSD42.2 billion in October. Economists had expected the deficit to shrink toUSD41.5 billion from theUSD43.4 billion originally reported for the previous month.

Traders await the Federal Reserve's minutes of the  December 17-18  monetary policy meeting, for indications on when it will start raising interest rates.

At the two-day meeting in December, the FOMC had said it would be "patient" in beginning to normalize the stance of monetary policy, replacing an earlier pledge to hold interest rates low for a "considerable time."

The greenback, which closed yesterday's trading at 1.1888 against the euro, climbed to a 9-year high of 1.1817. The next possible resistance for the greenback is seen around the 1.17 zone.

Eurozone inflation turned negative for the first time in more than five years in December, flash estimate from Eurostat showed.

The Harmonized Index of Consumer Prices fell 0.2% year-on-year in December, reversing the 0.3% rise in November. Prices were expected to drop by 0.1%.

Extending early advance, the greenback strengthened to 1.5097 against the Sterling, a 1-1/2-year high. The greenback may test resistance around the 1.50 area.

Retail prices in the  UK  were down a seasonally adjusted 1.7% on year in December, data from the  British Retail Consortium  showed.

That beat forecasts for a decline of 1.8% following the 1.9% fall in November.

The greenback reached as high as 119.54 against the Japanese yen, compared to 118.38 hit at yesterday's close. Continuation of the greenback's bullish trend may lead it to a resistance around the 121.5 mark.

The greenback hit 1.0161 against the Swiss franc, a level unseen since  September 2010  , and approached a 2-day high of 0.8048 against the Australian dollar. Further gains may see the greenback finding resistance around 1.025 versus the franc and 0.79 against the aussie.

The greenback strengthened to 0.7724 against the NZ dollar, up from Tuesday's closing value of 0.7758. On the upside, 0.76 is seen as the greenback's next resistance level.

The greenback was struck at early multi-year high of 1.1867 against the Canadian unit. Next key resistance for the greenback may be found near the 1.20 mark.

Source: Alliance