* ISM index shows improvement in services sector
* Japan finance minister resignation weighs on yen
* U.S. nonfarm payrolls data on Friday a key focus
(Recasts, updates prices, adds quote, changes byline)
By Wanfeng Zhou
NEW YORK, Jan 6 (Reuters) - The dollar rose against the yen
on Wednesday after data showed the U.S. service sector
continued to improve and on uncertainty surrounding the
resignation of Japan's finance minister.
The dollar, however, fell versus the euro and commodity
currencies such as the Canadian and Australian dollars as
steady stock prices spurred investors to buy higher-yielding
assets at the expense of the low-yielding greenback.
The Institute for Supply Management said its services index
rose to 50.1 in December, reaching above the 50 mark separating
expansion from contraction for the third time in four months.
The reading was above November's 48.7 but below economists'
median forecast of 50.5. For more see [].
"The market's interpretation of (the number) seems to have
been that it was pretty much in line with expectations. It's
not too bad and at least it was an improvement although not as
much as the market was expecting," said Matthew Strauss, senior
currency strategist at RBC Capital Markets in Toronto.
In afternoon trading, the dollar rose 0.9 percent to 92.58
yen <JPY=>. The euro <EURJPY=R> gained 1.1 percent to 133.20
yen.
The yen also came under pressure after news of Finance
Minister Hirohisa Fujii's resignation. His departure could add
to the challenges for the Japanese government as it wrestles
with deflation, a fragile economy and huge public debt.
Most analysts expect little impact on Japan's currency
policy, which is controlled by the finance ministry. But some
say Deputy Prime Minister Naoto Kan, who will succeed Fujii,
may be less tolerant of letting the yen rise and putting at
risk a fragile export-led recovery. []
"I think the market is a little bit more unsure not only on
the currency side, but also on the government finances side,"
Strauss said. "It created uncertainty and the market saw that
as enough reason to sell the yen."
Against the U.S. dollar, the euro was up 0.1 percent at
$1.4384 <EUR=>. The Australian dollar <AUD=> rose 0.6 percent
to US$0.9175, while the greenback fell 0.5 percent to C$1.0340
<CAD=> against the Canadian dollar.
JOBS DATA IN FOCUS
Major currencies are likely to trade in ranges ahead of a
key U.S. jobs report on Friday, which could help shape the
outlook for U.S. interest rates and the direction of the
dollar, analysts say.
Economists on average forecast U.S. job losses of 8,000 for
last month, according to a Reuters poll.
Earlier, data from ADP Employment Services showed the U.S.
private sector lost 84,000 jobs in December. That was fewer
than the 145,000 jobs lost in November, but exceeded the 73,000
economists had expected. []
"Clearly, we're still far from seeing jobs growth in the
economy," said Vassili Serebriakov, senior currency strategist
at Wells Fargo in New York. "The most important thing is the
trend in employment continues to improve."
Later in the session, the minutes from the Fed's latest
monetary policy meeting will be released.
"Traders are going to look for any indication that the Fed
will be looking to quickly exit the emergency stimulus measures
and after that what the timing might be for any increase in fed
funds," said Greg Salvaggio, senior vice president of Capital
Markets at Tempus Consulting in Washington.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
James Dalgleish)
