On Wednesday, the U.S. dollar (USD) surged to a 2-month high against the Japanese yen (JPY). The came after the Institute for Supply Management reported that their gauge of service-sector growth had increased to its highest level in ten years.
As a result, the USD/JPY traded at ¥124.90, up 0.6% after trading at ¥124.30 late on Tuesday in New York. Meanwhile, the EUR/USD traded at $1.0857, down 0.3 percent after trading at $1.0892 in New York late on Tuesday.
In addition, the ICE U.S. Dollar Index (DXY, -0.05%), which measures the strength of the greenback against a basket of six rival currencies, was at 98.1270, up 0.2 percent.
The gains seen in the USD came after volatile trading in the morning session and at the time, the U.S. dollar erased gains from the trading session on Tuesday. This came as a result of poor economic data which showed a weaker than expected reading on private-sector job growth from Automatic Data Processing Inc.
Adding to the negative impact on the greenback was comments from Federal Governor Jerome Powell who remained vague regarding an interest rate hike by the Federal Reserve in September this year.
After the ISM report, the Canadian dollar (CADUSD, +0.0455%) and the British pound (GBPUSD) continued to outperform. According to Colin Cieszynski, chief markets strategist at CMC Markets, the gain that was evident in the pound came as a result of optimism among investors ahead of a meeting on Thursday of the Bank of England (BoE).
Also, the Canadian dollar increased after official data showed that the trade deficit in the country had dropped to $624 million (480 million Canadian dollars). This reading beat analysts’ forecasts. In addition, the rising crude oil prices also supported the loonie.
MT4 Chart: EUR/USD