LONDON, Nov 5 - The dollar firmed near five-week highs on the euro on Wednesday as markets awaited key U.S. jobs data later this week, while high yielders like the Australian dollar were in focus after a surprise rate hike from Sydney. The Reserve Bank of Australia started what many expect to be a global round of rate increases, raising its key rate 25 basis points to 5.0 percent, boosting the Aussie to six-year highs on the dollar and lifting sterling on expectations the Bank of England (BoE) would hike on Thursday. Meanwhile the dollar was firming versus the euro and yen, as markets were anxious to see if a recent trend of bullish data surprises from the U.S. would continue in Friday's report on the labour market, which is still sluggish despite signs elsewhere of economic recovery. "The Aussie dollar obviously benefited from the rate hike. Also there was some spill-over into sterling, as the market seems to see this finally removing any uncertainty over interest rates in the UK tomorrow," said Adam Cole, senior currency strategist at Credit Agricole Indosuez. "In euro/dollar, dollar/yen it's fairly rangebound ahead of the all-important U.S. payrolls numbers on Friday.... The payrolls are the single most important release every month." At 0900 GMT, the dollar was up nearly half a percent at $1.1451 per euro , near one-month highs beyond $1.1430. The dollar was up marginally against the yen at 109.70 , after a selloff led by exporters on Tuesday knocked it off Monday's one-month highs of 111.49.
Meanwhile the Aussie rose as high as US$0.7118 , its highest since late 1997, and was still up nearly one percent on the day. Sterling was little changed on the day after earlier rising three-quarters of a cent to $1.6870 but it was up a third of a percent against the euro at 68.15 pence . The euro zone service sector index outstripped forecasts and rose 56.0 in October from 53.6 in September, well above the 50 level that divides expansion from contraction. But the data failed to give the euro much of a lift. Later on Wednesday the U.S. Institute of Supply Management's (ISM's) October service sector index is expected to show a reading of 63.0 versus 63.3 the previous month.
YEN RESILIENT
Traders were looking to Friday's U.S. employment report for clues on the U.S. economy. A gloomy U.S. jobs survey on Tuesday threw cold water on optimism over the economy sparked by last week's surprisingly strong gross domestic product data. Job placement firm Challenger, Gray & Christmas said the number of job cuts announced by U.S. employers surged 125 percent last month after declining in the two previous months. Planned layoffs at U.S. firms shot up to 171,874 in October from 76,506 in September, it said, rekindling worries that the job market was not benefiting from recent rises in production. Dealers said they would scrutinise Wednesday's ISM non- manufacturing report for signs of what the labour market was doing. "The employment component of that should be robust," said Cole at Credit Agricole Indosuez. "The Challenger number was very poor, which pulled the dollar back a little."//