FOREX-Dollar recoups earlier losses as market digests weak jobs data

(Recasts; adds analyst quote, updates prices)
By Kate Duguid
NEW YORK, June 5 (Reuters) - The U.S. dollar was higher on
Wednesday afternoon, retracing its earlier fall to a six-month
low against the Japanese yen following weak private sector jobs
data in the United States.
The dollar index .DXY was 0.28% higher to 97.342 and 0.26%
stronger against the yen JPY= at 108.42. Some of the afternoon
recovery can be attributed to an Institute for Supply Management
survey showing that U.S. services sector activity expanded at a
brisk pace in May. The recovery in the dollar may also be attributed to an
initial overreaction to data this morning.
Wednesday's ADP National Employment Report showed U.S.
private employers added 27,000 jobs in May, well below forecasts
and the smallest monthly gain in more than nine years. The data
knocked the dollar, adding to a multi-day slide on rising
expectations of an interest-rate cut. Federal Reserve Chairman Jerome Powell dropped his standard
reference to the bank being "patient" in approaching a rate
decision on Tuesday, saying instead it would respond as "as
appropriate" to trade pressure.
"I don't think the Fed wants to cut," said Marvin Loh,
senior global markets strategist at State Street Global Markets.
"The data remains, not great compared to last year, but above
trend."
"Not only are we pricing in rate cuts aggressively, we're
pricing them in soon."
The U.S. Labor Department delivers its non-farm payrolls
report on Friday, which includes both public and private sector
employment. Economists polled by Reuters expect that report to
show job growth slowed in May.
"We'll be looking for some sort of confirmation that the
three month average is still in place. Last month was such an
outlier in terms of gains that you would expect it to slow down
a bit," said Loh.
The European Central Bank meets on Thursday, with investors
looking to see how concerned policymakers are about signs of a
downturn in growth. The euro EUR= was 0.25% weaker at $1.122
on the dollar move.
Recession fears are sweeping across the world and central
banks, including those of Australia and New Zealand, have cut
rates in recent weeks. Weakness in global growth may ultimately be benefiting the
dollar, despite the increased expectations of a rate cut.
"When the Fed stopped hiking, given the falloff in some of
the global counterparts - where you saw slowing in Europe,
slowing across the globe - the dollar was getting an implicit
bid because of the relative price," said Carl Mastroianni,
portfolio specialist at Insight Investment.