U.S. service sector shrinks less in June: ISM

NEW YORK (Reuters) - The U.S. service sector contracted in June, but at a slower pace than in May, according to a report released on Monday.

KEY POINTS: * The Institute for Supply Management's services index rose to 47.0 last month from 44.0 in May, above economists' median forecast for a rise to 46.0. The dividing line between growth and contraction is 50. * The services sector represents about 80 percent of U.S. economic activity, including businesses such as banks, airlines, hotels and restaurants.

COMMENTS:

DAVID WATT, SENIOR CURRENCY STRATEGIST, RBC CAPITAL

MARKETS, TORONTO:

"The key figure that jumps out is the employment index which rose 43.4 from 39 in May. If this data came out before the June U.S. payrolls, people would have paid more attention and would have said job losses would be 250,000. But since this came out after payrolls, the price action in FX has been relatively minor. Based on this report, things are sort of getting better, but the market is still cautious."

OMER ESINER, FX MARKET ANALYST, TRAVELEX GLOBAL BUSINESS

PAYMENTS, WASHINGTON:

"On balance, it was better then expected, and that will prompt the dollar to pare some of its overnight gains. We are seeing the market lose some of its recent optimism, though, and re-balance its outlook for the global economy. Over the longer term, I think that will continue to benefit the dollar and the yen and undermine the Aussie, pound and Canadian dollar, which had been the best performing currencies in the second quarter."