* Weak U.S. economic data sinks dollar
* U.S. service sector growth slows to weakest since 2010
* Dollar falls more than 1 percent vs yen
* Australian dollar rises 1.3 percent as RBA keeps rates
* New Zealand dollar up 1.4 percent after strong dairy
(New throughout, updates prices and market activity to U.S.
By Dion Rabouin
NEW YORK, Sept 6 The dollar tumbled on Tuesday
after economic data showed the U.S. service sector grew at its
slowest pace since early 2010, which dimmed expectations for a
near-term interest rate increase from the Federal Reserve.
The dollar fell to a one-week low against the Japanese yen
after the data, and the British pound rose to its highest level
against the dollar since mid-July.
The Institute for Supply Management's non-manufacturing
purchasing managers' index fell to 51.4 last month, far short of
economists' expectations and the largest one-month drop since
"When you pair that with data we got Friday, which was
non-farm payrolls, disappointing some, what it does is it starts
to kick back interest rate expectations past the September
meeting and even lowering them in December too," said John
Doyle, director of markets at Tempus Inc in Washington.
"You're seeing slightly softer data over the last couple of
trading sessions equals less likelihood the Fed will raise rates
at the meeting this month and with that comes a slightly weaker
The service sector makes up more than two-thirds of the U.S.
Friday's U.S. non-farm payrolls report showed employers in
the United States added 151,000 jobs last month, missing
economists' expectations and falling well below readings in June
and July, which both showed more than 250,000 jobs added in each
On Tuesday, the dollar fell more than 1 percent against the
yen, slipping to 102.05 yen per dollar.
The British pound rose by 1 percent against the
dollar, touching a fresh seven-week high at $1.3443. The euro
rose to $1.1255, its highest since Aug. 26 after the
The dollar index dropped 1 percent to 94.821, its
lowest since Aug. 26.
The New Zealand dollar was the biggest gainer among major
currencies, rising 1.4 percent against its U.S. counterpart to
its highest level since May 2015. The kiwi was boosted by the
weak U.S. data and a rise in milk prices after a strong dairy
auction in New Zealand.
The Australian dollar jumped 1.3 percent against the
greenback after the data. The Aussie was also bolstered by the
Reserve Bank of Australia's decision to leave interest rates
unchanged at 1.5 percent and minimal commentary from the central
bank on the currency's 10 percent rise against the U.S. dollar
(Reporting by Dion Rabouin; Editing by David Gregorio)