FOREX-Dollar eases off of two-week high following soft U.S. data

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(Adds results from U.S. economic data, analyst quotes, updates
prices)
By John McCrank
LONDON, May 5 (Reuters) - The dollar eased off of its more
than two-week high hit earlier on Wednesday following some
softer-than-expected U.S. economic data that prompted traders to
consolidate positions ahead of the April jobs report due at the
end of the week.
U.S. private payrolls rose by the most in seven months in
April, ADP data showed on Wednesday, as companies boosted
production to meet a surge in demand amid massive government
spending and rising COVID-19 vaccinations. But the 742,000
private jobs created fell short of the 800,000 jobs expected by
economists in a Reuters poll. In the U.S. services industry, activity eased in April from
a record level in March, likely due to shortages of inputs amid
a burst of demand, data from the Institute for Supply Management
showed.
"That's certainly worrisome for U.S. dollar traders and
holding them back from restoring long dollar positions ahead of
non-farm payrolls," Kathy Lien, managing director at BK Asset
Management, said of the data.
The median forecast for Friday's jobs report is for a rise
of 978,000, but estimates stretch as high as 2.1 million.
"There is a good chance it will exceed 1 million, but as we
look at some of the leading indicators for the economy, the
recovery and the labor market, we are not seeing that outsized
strength that everybody had anticipated and that's holding the
dollar back," Lien said.
The dollar index, which measures the greenback against a
basket of peer currencies, was last at 91.262 after rising as
high as 91.436 earlier in the session, its highest since April
19.
The earlier bounce was partly prompted by comments from U.S.
Treasury Secretary Janet Yellen that rate hikes may be needed to
stop the economy from overheating. Yellen later downplayed their importance, but even the
slightest mention of U.S. tightening has an outsized impact in
markets that have become so dependent on monetary stimulus.
"The markets may be tempted to do some 'yellen and
screaming' after last night's episode, following the apparent
hawkish comments by the U.S. Treasury secretary and the
subsequent backtracking," said Valentin Marinov, head of G10 FX
research at Credit Agricole.
"All that said, the comments do highlight that there is now
an ongoing debate among the U.S. officials about the need to
curb the Fed's ultra-aggressive monetary stimulus," Marinov
added.
So far, Federal Reserve Chair Jerome Powell has argued that
the labor market is still far short of where it needs to be to
start talking of tapering asset buying.
Three more Fed officials are speaking on Wednesday,
providing the opportunity for further market-moving comments.
The dollar was nearly flat against the euro EUR=EBS , at
$1.2006, which had earlier dropped below the $1.20 mark, its
lowest against the greenback in more than two weeks.
Trading was limited in the overnight session, with Japan and
China on holiday, but the New Zealand dollar jumped 0.93% to
$0.72150 NZD=D3 on the back of stronger-than-expected jobs
data. The Australian dollar ticked up 0.51% to $0.77505.
Sterling traded 0.15% higher at $1.39075 a day ahead of the
Bank of England meeting, where it is expected by some to
announce a tapering of its bond-buying programme. GBP=D3
GBP/

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