Investing.com - The dollar rose to two-month highs against the yen on Wednesday after data showing that activity in the U.S. service sector expanded at the fastest rate in ten years last month, bolstering the outlook for higher interest rates.
USD/JPY was up 0.41% to 124.88, the most since June 8 from around 124.25 ahead of the data.
The Institute of Supply Management said its non-manufacturing purchasing manager's index rose 60.3 last month from 56.0 in June, well above forecasts for a reading of 56.2.
The upbeat report reinforced expectations that the Federal Reserve will raise rates in the coming months, possibly as early as September.
On Tuesday, comments by a Fed official fueled expectations for a September liftoff.
Atlanta Fed President Dennis Lockhart said it would take a “significant deterioration in the economic picture” for him to not support a rate hike in September.
The data offset earlier economic reports showing that U.S. private sector hiring slowed sharply in July while the trade deficit widened in June.
The ADP nonfarm payrolls report showed that the U.S. private sector added just 185,000 jobs in July, which was the smallest increase since April. The data dampened expectations for a strong reading in Friday’s government nonfarm payrolls report.
Separately, the Commerce Department said the trade deficit increased 7.1% to $43.8 billion in June, compared to expectations for a deficit of $42.8 billion.
The dollar was at two-week highs against the euro, with EUR/USD easing 0.13% to 1.0865.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 98.20, not far from three month peaks of 98.33.