Dollar dipped to a fresh nine-month low against the euro on Wednesday as economists at Goldman Sachs raised their forecast for U.S. real GDP growth to 3% from 1% for both the third and fourth quarters of 2009. Earlier, dollar rebounded strongly after reports showed that U.S. private employers eliminated more jobs than expected last month and the major services sector shrank again, sparking concerns about the strength of a U.S. recovery. ADP Employer Services indicated that American private employers cut 371,000 jobs in July, less than the 463,00 in June but more than economists' forecast of 345,000. In addition, the Institute for Supply Management’s index of non-manufacturing businesses fell to 46.4 last month from 47.0 in June.

Euro rose to as high as 1.4448 against the dollar after Goldman Sachs raised its U.S. real growth forecast in late New York afternoon. Investors were also still optimistic about a global recovery and were focusing on the slower pace of U.S. job losses in July compared to June. Earlier, euro traded as low as 1.4355 after the weaker-than-expected U.S. economic data, which signaled more uneasy times for the broader U.S. economy and sent stocks lower. Furthermore, the European Central Bank is expected to keep interest rates on hold at a record low of 1.0% on Thursday. ECB stated in its July policy meeting that economic activity would remain weak for the rest of the year but the pace of decline was likely to ease from the 2.5% pace recorded in Q1.

The British pound hit a fresh multi-month high against the greenback as a batch of stronger-than-expected U.K. data strengthened the view that the worst of the recession is over. U.K services PMI came in better than expected at 53.2 compared to consensus forecast of 51.8. Data from the Office for National Statistics said U.K. manufacturing unexpectedly jumped to 0.4% in June from revised a drop of 0.6% in May. Also, a survey revealing another rise in U.K. house prices raised hopes that the U.K. economy will return to growth later this year. Cable rose to as high as 1.7044 before paring gains after the weaker-than-expected U.S. ISM data. The Bank of England is widely expected to hold interest rates at a record low of 0.5% at its policy meeting ending on Thursday. Market’s focus will be on whether the central bank will expand its 125 billion pound asset-buying program.

The Japanese yen strengthened versus its counterparts as demand for higher-yielding currencies fell after the release of worse-than-expected U.S. data. Eur/jpy dropped from 137.59 to 136.22, gbp/jpy slipped from 162.43 to 160.60/65 and aud/jpy weakened to as low as 79.34 before rebounding in late New York trade.

Data to be released on Thursday include New Zealand and Australia unemployment rate, Japan leading indicators, German factory orders, BOE and ECB rate decisions, Canada building permits and U.S. jobless claims.