Investing.com - The dollar rose to ten-and-half month highs against a basket of other major currencies on Tuesday after a report showed that the U.S. service sector expanded at the quickest pace in more than three years in July.
The dollar was boosted after the Institute of Supply Management reported that its services purchasing manager's index rose to 58.7 from 56.0 in June. Economists had expected the index to tick up to 56.3.
The new orders component of the index rose to 64.9 from 61.2 in June, the highest reading since August 2005. The employment index rose to 56 from 54.4 in June, the fifth consecutive month of growth the report said.
The report indicated that the economic recovery in the U.S. is continuing to gain momentum, offsetting Friday’s employment report, which showed that jobs growth slowed slightly in July.
The euro fell to nine month lows, with EUR/USD down 0.42% to 1.3365.
Sentiment on the single currency remained weak ahead of the outcome of the European Central Bank’s monthly monetary policy meeting on Thursday, amid concerns over the diverging monetary policy stance between it and its major peers, as the bank attempts to combat growing deflationary pressures in the euro area.
The dollar extended gains against the yen and the Swiss franc, with USD/JPY up 0.26% to 102.83 and USD/CHF adding 0.40% to trade at seven-month highs of 0.9101.
GBP/USD was almost unchanged, off the session highs of 1.6888 hit earlier after data showed that the U.K. services sector expanded at the fastest rate in eight months in July.
The robust data added to the view that the deepening economic recovery in the U.K. would prompt the Bank of England to raise interest rates before the end of 2014.
The Australian dollar was weaker, with AUD/USD down 0.23% to 0.9311. Earlier Tuesday, the Reserve Bank of Australia left rates unchanged at 2.5% and indicated that rates are likely to remain on hold for longer.
Elswehere, NZD/USD fell 0.55% to 0.8475, while USD/CAD advanced 0.45% to a two-month high of 1.0953.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose to highs of 81.70, the most since mid-September.