"With the ADP report, the initial reaction was mild relief that the numbers weren't worse because yesterday the horrible ISM (manufacturing) data had a pretty weak employment component," said Erik Bregar, director and head of FX strategy at Exchange Bank of Canada in Toronto. Many analysts, however, say the dollar's higher yield and the relative strength of the US economy should make its setback temporary. Non-farm payrolls data due on Friday should give more insight into the health of the US economy.
In morning trading, the dollar fell 0.3% against the yen to 107.39 yen, reflecting investor demand for safer assets after the manufacturing data heightened concerns about the health of the global economy. The euro rose 0.1% against the dollar to $1.0944 but was above Tuesday's two-year low of $1.0879.
The dollar index, which measures the greenback's value against a basket of six major currencies, was little changed at 99.13 after reaching 99.667 on Tuesday, a 29-month peak, before the manufacturing data was released. Elsewhere, the Australian dollar fell 0.2% to US$0.6696, its weakest since early 2009, as investors sold currencies linked to the outlook of the global economy. The Aussie fell to a fresh 10-year trough on Wednesday after the Reserve Bank of Australia cut rates to a record low on Tuesday. The pound was down 0.1% at $1.2290 amid doubt over whether Prime Minister Boris Johnson's final Brexit offer to the European Union would be well-received by Brussels.