The U.S. dollar edged up on Wednesday, extending its gains from last week on doubts about the outlook for another Fed rate cut this year and as private payrolls data assuaged worries over the state of the labor market.

U.S. private payrolls rose by 42,000 jobs in October, exceeding expectations of a 28,000 gain, according to a Reuters poll of economists.

While the turnaround likely does not suggest a material shift in the labor market because some industries such as professional business services shed jobs for a third straight month, it did help soothe worries about labor market weakness.

Separately, data showed the U.S. services sector activity picked up in October amid a solid increase in new orders.

The dollar has firmed against the euro after the Federal Reserve cut interest rates by 25 basis points last week while signalling caution about further easing this year.

"The ongoing hawkish repricing in rates and currency markets was given added momentum this morning when ADP reported a stronger-than-expected rebound in private sector job creation," Karl Schamotta, chief market strategist with payments company Corpay in Toronto.

"With the preponderance of available data pointing to resilience in American labour markets, the case for aggressive course of monetary easing is looking fairly flimsy here, and investors are growing reluctant to place big directional bets on lower yields ahead," Schamotta said.

Still, despite the absence of BLS's closely-watched employment report due to the longest government shutdown on record, economists continue to urge caution when interpreting the ADP report, noting differences in methodologies among other limitations.

The dollar has also been helped in the last two sessions by a bout of risk aversion sweeping global financial markets as a tech-led sell-off stoked worries about stretched valuations.

"The greenback is outperforming its high-beta counterparts as market participants gravitate toward the safety and liquidity offered in dollar-denominated assets," Schamotta said.

Against a basket of currencies the dollar was up 0.11% at 100.28, its highest since May 29.

"A push through the low 100 level would suggest that the general USD rebound is likely to extend, potentially quite significantly over the next few weeks," FX strategists at Scotiabank said in a note.

"A stall and reversal from the low 100 area, meanwhile, implies a continuation of the broad consolidation range for the DXY in place since the middle of the year," they wrote.

The yen gained as much as 0.5% earlier in the session before reversing course to trade down 0.3% against the buck.

Investors will be watching the U.S. Supreme Court's hearing on the legality of Donald Trump's tariffs, a case with implications for the global economy and a potential catalyst for currency markets.

Source: Investing.com