Dollar index hits five-day high after strong U.S. private-sector jobs data

Demand for the greenback continued to be underpinned as markets remained confident that the Fed will hike interest rates at its meeting next week.

A report showing that private companies added 298,000 jobs in February pushed market-implied probability of a Fed move to 92 percent, according to the CME's FedWatch tracker that measures the futures market.

US economic data had been improving in recent weeks as the Fed forecast, and the jump in USA stock prices, alongside improved consumer and business confidence readings, provided an opening to hike rates without overly rocking markets, public and private comments by Fed officials suggested.

Stock market traders weren't expecting a rate hike so soon, but market watchers say they'll take the fed rate hike in stride, anyway.

The greenback showed muted reaction to data showing that the US trade deficit jumped to an nearly five year high in January as rising oil prices pushed up the cost of imported fuel.

The Dow Jones Industrial Average .DJI fell 2.73 points, or 0.01 percent, to 20,951.61.

The S&P 500 healthcare index dropped 0.65 per cent, setting it up for its worst day in more than five weeks.

The dollar edged up against a basket of six major peers to 101.68, after retreating to a one-week low of 101.22 on Monday.

There is little expectation that ECB President Mario Draghi will announce changes to the bank's ultra-loose monetary policy despite rising inflationary pressures.

Oil dropped further below $56 a barrel after an industry report pointed to a large rise in USA crude inventories, renewing oversupply concerns despite output curbs by the Organization of the Petroleum Exporting Countries.

Brent crude added 17 cents at $56.18 a barrel while US West Texas Intermediate (WTI) crude rose 19 cents at $53.39.

The U.S. central bank prefers to have market expectations aligned with its own policy plans.

"The dollar is not likely to gain further against the yen, with an expected range around 111 to 115 yen during March", said Masashi Murata, senior currency strategist at Brown Brothers Harriman.

The benchmark 10-year Treasury yield was up almost two basis points at 2.511 per cent, while two-year yield edged up one basis point at 1.322 per cent.

  • Zachary Reyes