(Bloomberg) -- The dollar dropped by the most in three weeks as data showed the US services sector contracted in June at the fastest pace in four years, sending Treasury yields lower.
The Bloomberg Dollar Spot Index dropped 0.4% Wednesday, the biggest decline since June 12. The currency lost ground against all of its major counterparts, with the Norwegian krone, Swedish krona and the Australian dollar leading the advances. The yen rose as much as 0.4% to trade below 161 per dollar.
The signs of economic slowdown fueled speculation that the Federal Reserve will start cutting interest rates before the year is out. That eroded one pillar of support for the currency, which has been pushed up as the US central bank keeps rates high and waits for more evidence that inflation is consistently receding.
The US services sector contracted last month due to a sharp pullback in business activity and declining orders. Another report on labor market earlier on Wednesday added further evidence that the labor market is cooling, with US companies hiring workers at a more moderate pace in June and wage growth easing, according to private payrolls data from the ADP Research Institute.
Traders are now bracing for report on non-farm payroll Friday.
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