The dollar fell across the board on Wednesday after weaker-than-expected U.S. private payrolls highlighted continued slack in the labor market and data showed the U.S. services sector contracted for the first time in about a year in May.

U.S. private payrolls rose by just 37,000 jobs in May, much less than expected, after a downwardly revised 60,000 gain in April, the ADP National Employment Report showed on Wednesday.

Economists polled by Reuters had forecast private employment rising by 110,000 after a previously reported gain of 62,000 in April.

U.S. President Donald Trump reiterated his call for Federal Reserve Chairman Jerome Powell to cut interest rates after the data.

"This is a big gap between expectations and actuals," Juan Perez, director of trading at Monex USA in Washington, said.

"The idea that labor is not hurting and that the post-pandemic recovery is good enough that people are enjoying good opportunities … that narrative is changing and it's really negative for the dollar," he said.

Separately, data showed the U.S. services sector contracted for the first time in nearly a year in May while businesses paid higher prices for inputs, a reminder that the economy remains in danger of a period of very slow growth and high inflation.

"The Fed will take notice of the slower job growth, but it's not going to be enough to convince them to cut rates anytime soon," Bill Adams, chief economist at Comerica Bank, said in a note.

The dollar fell 0.7% to 142.89 Japanese yen. The euro rose 0.4% to $1.1414, ahead of the European Central Bank's decision on interest rates expected on Thursday. ,

Investors are awaiting Friday's monthly payrolls figures to gauge the state of the labor market, and trade negotiations remain focused. The Trump administration has given countries a Wednesday deadline to submit their best trade deals, the same day it doubled tariffs on steel and aluminum imports.

Trump is also expected by the White House to call Chinese President Xi Jinping this week, after both sides accused each other of violating terms of last month's agreement to lift some tariffs.

Trump posted on his social media platforms on Wednesday that Xi was "tough" and "difficult to deal with."

The dollar index, which measures the greenback against six major currencies, was down 0.3% on the day at 98.838, not far from a late April low of 97.923.

The Hong Kong dollar was at 7.847 per U.S. dollar, the closest it has been to 7.85 — the bottom of its trading range against the greenback — since August 2023, according to LSEG data.

The pound was up 0.2% at $1.35515. Britain and its metal exports are exempt from increased US tariffs, given the UK's trade agreement. (alg)

Source: Reuters