* Dlr edges higher vs euro, falls vs yen after mixed data
* ISM data show service sector contraction
* ADP, Challenger reports signal unease in labor markets
* Focus turning to ECB and BoE policy meetings
(Adds comments, details, updates prices)
By Vivianne Rodrigues
NEW YORK, Aug 5 (Reuters) - The dollar edged higher versus
the euro on Wednesday as reports showing greater-than-expected
U.S. service sector contraction in July and surprisingly high
job cuts by private employers boosted demand for the greenback
as a safe haven.
The advance contrasts with the dollar's sharp drop earlier
in the week as upbeat U.S. and Chinese manufacturing data gave
investors confidence to buy foreign currencies and riskier
assets such as stocks.
However, Wednesday's lackluster reports signaled more
uneasy times for the broader U.S. economy and renewed risk
aversion, sending stocks lower and supporting demand for the
dollar, traders said.
Increased risk aversion tends to favor currencies such as
the yen, a favored safe haven, and the dollar versus
higher-yielding counterparts.
"It became a bit hard to support aggressive selling in the
dollar versus the euro after this batch of mixed data," said
Win Thin, a currency strategist at Brown Brothers Harriman in
New York. "This is not going to be a typical economic recovery,
which poses a bit of a dilemma for the dollar."
In midday trading in New York, the euro was down 0.1
percent at $1.4390 <EUR=> after trading as high as $1.4437. The
euro zone single currency retreated from $1.4445 on Monday, its
highest since December.
Against the yen, the dollar was 0.3 percent lower at 94.93
yen <JPY=>.
The Institute for Supply Management said its
non-manufacturing index fell to 46.4 in July from June's 47.0.
A reading above 50 signals expansion. Economists had expected a
reading of 48.0. For details see [].
The ISM report was much weaker than expected, contributing
to a "risk-off kind of scenario" in the foreign exchange
markets, favoring the dollar, said Andrew Busch, a global FX
strategist at BMO Capital Markets in Chicago.
Another report showed new orders received by U.S. factories
rose unexpectedly in June, advancing for a third straight
month. []
The services sector and new orders figures followed reports
showing larger-than-expected job cuts by U.S. private employers
in July and an increase in planned layoffs at U.S. firms.
[] and []
The labor markets data "weighed on risk appetite and
consequently revived some demand for safe-haven currencies,"
said Joe Manimbo, a currency trader at Travelex Global Business
Payments in Washington.
Another gauge of the state of the U.S. labor markets is
expected on Friday with the government's release of its monthly
nonfarm payrolls data.
POLICY MEETINGS
Investors' focus will also be on policy decisions by the
Bank of England and European Central Bank due on Thursday.
"People are going to sit tight ahead of the central bank
meetings in Europe and the jobs report on Friday," said Thin,
at BBH.
A Reuters poll last week showed economists are split over
whether the BoE will extend its quantitative easing program,
although recent brighter UK economic data are seen reducing
such chances. But analysts said it could still not be
completely ruled out.
"It would be a brave investor that held on to an
aggressively long sterling position into the BoE meeting,"
Daragh Maher, deputy head of FX strategy at Calyon, said in a
note.
Sterling rose earlier to $1.7042 <GBP=>, its highest since
mid-October.
(Additional reporting by Wanfeng Zhou and Gertrude
Chavez-Dreyfuss; Editing by James Dalgleish)
