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US dollar gains on bets ECB could weaken euro, strong US data

[NEW YORK] The US dollar rose broadly on Wednesday on speculation the European Central Bank could step in to weaken the euro and after strong US economic data boosted expectations for a solid US jobs report on Friday.

The euro was on track for its biggest daily percentage drop against the US dollar in nearly four weeks, of about 0.7 per cent, putting it back below US$1.20 after touching a more than 2-1/2-year high of US$1.2069 Tuesday. It last traded at US$1.1890.

Analysts said traders were starting to suspect that ECB President Mario Draghi could be growing more concerned about the euro's rise, despite making no mention of the currency's strength at a central bank gathering in Jackson Hole, Wyoming last Friday.

Mr Draghi's omission of commentary on the euro that Friday had contributed to the currency breaking past the critical US$1.20 level Tuesday. The euro is up more than 13 per cent against the US dollar this year.

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"We've come a long way rather quickly," said Dean Popplewell, chief currency strategist at Oanda in Toronto, in reference to the euro's gains this year. He said European economic data had not justified the euro's appreciation this year.

The ECB is set to hold a policy meeting next week.

The US dollar also gained after the Commerce Department said its second estimate of US gross domestic product showed that it increased at a 3 per cent annual rate in the second quarter, its quickest pace in more than two years.

The ADP National Employment Report showed US private-sector employers hired 237,000 workers in August for the biggest monthly increase in five months, also boosting the greenback and driving expectations for a solid US August non-farm payrolls figure.

The US dollar touched a two-week high against the yen of 110.43 yen after the US data, rising further off a 4-1/2-month low of 108.25 struck Tuesday following North Korea's launch of a ballistic missile over Japan.

The US dollar index, which measures the greenback against a basket of six major currencies, was last up 0.7 per cent at 92.879 after temporarily hitting a more than 2-1/2-year low of 91.621 Tuesday.

Economists polled by Reuters expect Friday's non-farm payrolls report to show US employers added 180,000 jobs in August.

"Even if you have a small positive surprise (in non-farm payrolls), even around 200,000, that may extend the bid tone for the dollar," said Mazen Issa, senior currency strategist at TD Securities in New York.