NEW YORK, Jan 7: The dollar slumped on Wednesday, reversing sharp gains against the euro and yen earlier this week, as steep job losses in the private sector rekindled fears of a prolonged US recession.

The report, compiled by ADP Employer Services, showed a 693,000 decline in US private sector employment for December, which could well prompt some analysts to lower their already weak forecasts for the month.

In midday New York trading, the euro surged to $1.3677, up 1.3 per cent on the day, recovering from near one-month lows on Tuesday, according to Reuters data.

The euro, however, remained vulnerable as euro zone data showed a rapidly weakening economy and easing inflation there, which raised prospects for the European Central Bank to cut rates again next week.

Against the yen, the dollar fell 1 per cent to 92.65, after hitting five-week highs the previous day.

The ICE Futures’s dollar index, a gauge of the greenback’s value against a basket of six major currencies, fell 1.1 per cent to 81.880.

Joel Prakken, chairman of Macroeconomic Advisers, said on Wednesday the ADP report suggested that the government’s more comprehensive non-farm payrolls data could show a loss of about 670,000 jobs.

Still, analysts said the impact on the dollar of a potentially dismal number for Friday’s jobs data could be muted.—Reuters