Dollar rallies as Wall Street falls
Sharp decline in stocks sees investors rush to the safe haven of the greenback.
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NEW YORK (Reuters) -- The dollar posted sharp gains Wednesday as weaker-than-expected U.S. economic data and steep losses in stocks reminded investors that the road to recovery may not be as smooth as many initially thought.
That rekindled demand for the greenback as a safe haven, with comments from Asian officials that Asia would keep buying U.S. Treasurys even if the U.S. credit rating were to be cut also boosting the currency.
Remarks from monetary sources in China, Japan, India and South Korea compiled by Reuters from separate interviews helped stem the recent selling that has driven the dollar index to its lowest this year and down more than 7% since the start of May.
"Some of today's gains (in the dollar) are caused by a weakening domestic economy which flies in the face of the optimism played out by global equity market investors," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
A report by ADP showed on Wednesday that more than half a million U.S. private sector jobs were lost in May and the service sector, which accounts for about 80% of economic activity, contracted for the eighth straight month May.
The reports have cast doubt on a growing view that the U.S. economy has turned the corner, analysts said, prompting investors to take profits in higher-yielding but riskier currencies such as the Australian and New Zealand dollars against the greenback.
That said, traders said that after the dollar's steep losses in May, the U.S. currency had been poised for a rebound anyway.
The comments from Asian monetary officials provided investors an exit from short dollar positions.
Traders viewed the comments as an expression of support for dollar-denominated assets from the nations that control about half of the world's currency reserves.
In early afternoon trading, the euro traded 1.2% lower at $1.4128 after hitting a session low of $1.4118 and falling from the year high of $1.4339 hit in early trade.
The ICE Futures' dollar index, which tracks the currency's moves against a basket of six currencies, rose 1.4% to 79.561.
Sterling fell as low as $1.6256. It last traded down 1.9% at $1.6260. 
