Forex - Dollar Dips, Yellen Speech Eyed

The dollar fell against a basket of major currencies despite a duo of reports on the services sector and labor market topping expectations as traders awaited a speech from Federal Reserve chair Janet Yellen.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.12% to 93.30.

ISM nonmanufacturing data for September showed an uptick to 59.8, beating expectations of 55.7. This represents the highest reading for the service sector index since August 2005 when the index hit 61.3, according to ISM.

The services sector is critical component of the US economy, accounting for roughly 80% of U.S. private-sector gross domestic product (GDP).

On the labor market front, private payrolls grew by 135,000 for the month, a sharp decline from the 228,000 in August, according to a report released Wednesday by ADP and Moody's Analytics. That beat economists’ forecast of 125,000.

The pair of reports come ahead of speech by Fed chair Janet Yellen amid growing speculation concerning President Donald Trump’s choice for the next head of the Federal Reserve.

Fed Governor Jerome Powell is favored over former Fed governor Kevin Warsh by U.S Treasury Secretary Steven Mnuchin, Politico reported on Wednesday. That pressured both the dollar and yields as Jerome Powell is widely viewed as the less hawkish candidate.

A stronger pound and euro also weighed on the dollar following better-than-expected UK and Eurozone service sector data.

GBP/USD rose to $1.3275, up 0.29% while EUR/USD added 0.15% to $1.1762. Gains in the euro were capped, however, as political uncertainty remained front and center in the wake of Catalonia vote for independence.

USD/JPY fell 0.02% to Y112.83 while USD/CAD fell 0.03% to C$1.2484.