April 5, 2017 / 7:29 PM / in 7 months

FOREX-Dollar rises after strong U.S. private sector jobs report

(Adds analyst comment, Fed minutes, updates prices)

* U.S. ADP report shows job gains in March

* Investor anxiety lingers ahead of Trump-Xi meeting

* Shrinking Fed balance sheet this year warranted -minutes

By Gertrude Chavez-Dreyfuss

NEW YORK, April 5 (Reuters) - The U.S. dollar gained against the yen on Wednesday for the first time in four days after a report showed U.S. private sector employers created more jobs than expected in March, suggesting a generally stable labor market.

Capital Economics U.S. economist Andrew Hunter said the jobs survey was clearly another indication that, despite the apparent slowdown in economic growth in the first quarter, labor market conditions have remained unusually strong.

The greenback also rose against the euro and Swiss franc while trimming losses against the pound after the employment data.

The U.S. currency, meanwhile, held gains after minutes of the latest Federal Open Market Committee meeting last month indicated that Fed policymakers think the central bank should take steps to begin trimming its $4.5 trillion balance sheet later this year as long as the economic data holds up.

“The release of the minutes from the March FOMC meeting provided a dose of hawkish rhetoric following what has been mostly perceived as a dovish hike from the March 15th meeting,” said Marvin Loh, senior global markets strategist, at BNY Mellon in Boston.

He added that the discussion of eventual reduction in the Fed portfolio was a bit of a surprise for the market.

During the Fed’s five years of quantitative easing, the Fed has purchased $2.46 trillion in Treasury notes and bonds and $1.75 trillion in mortgage backed securities. As these securities mature, the Fed buys similar securities as a replacement to keep the balance sheet from shrinking.

Early gains in the dollar kicked off after data showed U.S. private employers added 263,000 jobs in March, more than their hirings in February and well above economists’ expectations, a report by a payroll processor showed on Wednesday.

Economists surveyed by Reuters had forecast the ADP National Employment Report to show a gain of 187,000 jobs, with estimates ranging from 110,000 to 225,000.

Before the data’s release, the market has been rattled by political tension arising from an upcoming meeting between U.S. President Donald Trump and Chinese counterpart Xi Jinping.

Trump’s consistently harsh rhetoric on China has raised concerns about Thursday’s summit, as has speculation that the U.S. president will face challenges implementing his promised growth-boosting policies after his administration failed to pass a healthcare overhaul.

In late trading, the dollar rose 0.2 percent to 111.39 yen .

The dollar index, which tracks the U.S. currency against a basket of six peers, was flat at 100.54. The euro was slightly lower at $1.0667.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama

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