Investing.com - The greenback traded mixed to lower against most major currencies on Wednesday after lackluster data left markets unclear over the pace of U.S. recovery, while concerns that emerging markets may be cooling sent investors into safe-haven yen positions.
In U.S. trading on Tuesday, EUR/USD was up 0.11% at 1.3533.
The greenback softened though it did come off earlier lows after the Institute for Supply Management reported that its services purchasing managers’ index came in at 54.0 in January, up from 53.0 in December.
Analysts had expected the index to rise to 53.7.
The employment component of the index rose to its highest level since November 2010.
The data eased concerns over a possible slowdown in U.S. recovery after Monday’s ISM manufacturing index showed that activity slumped to a seven-month low in January, which was partially the product of rough winter weather.
Elsewhere, payroll processor ADP reported that private-sector non-farm payrolls rose by 175,000 in December, below expectations for an increase of 180,000, which weakened the dollar.
Losses were limited, though, as investors concluded that a string of blizzards and bitter cold snaps may have prompted businesses to put off hiring early this year.
Friday’s official U.S. jobs report is expected to show that jobs growth rebounded in January after unseasonably cold weather in December kept gains down to 74,000.
Lackluster economic indicators reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, or even leave it on hold if need be, while policy tightening remains far off on the horizon.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
Meanwhile in the euro zone, data revealed showed that euro zone retail sales fell at their fastest rate since May 2011 in December.
Retail sales were down 1.6% from November and fell 1% on year-over-year basis, according to Eurostat. Market expectations had been for a 0.5% monthly decline and a 1.5% annual gain.
Sales of food, drink and tobacco fell 1.4%, while sales of non-food products dropped 1.8%.
The poor data stoked deflationary concerns, especially after data last week revealed that the annual rate of inflation slowed to 0.7% in January. The report reawakened fears that the European Central Bank may hold off on tightening policy to stave off deflation.
The dollar was down against the yen, with USD/JPY down 0.29% at 101.35, and down against the Swiss franc, with USD/CHF down 0.03% at 0.9034.
Then saw continued demand from investors fleeing exposure from emerging markets on fears they may be cooling.
The greenback was up against the pound, with GBP/USD down 0.06% at 1.6314.
Sterling softened on Wednesday after data revealed that activity in the U.K.’s service sector slowed unexpectedly in January.
The U.K. services PMI for January came in at seven-month low of 58.3, down from 58.8 in December. Analysts had expected the index to tick up to 59.0.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.05% at 1.1077, AUD/USD down 0.20% at 0.8908 and NZD/USD down 0.41% at 0.8210.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.13% at 81.13.
On Thursday, the U.S. is to publish data on its trade balance as well as its weekly report on initial jobless claims.