The dollar fell against the pound but rose against the euro on Wednesday amid better than expected economic data and the downgrade of Russia's long-term currency ratings.

Economic activity in the US non-manufacturing sector contracted in January, but at a slightly lower rate, according to research group Institute for Supply Management (ISM).

The ISM service sector index registered 42.9 percent in January, 2.8 percentage points higher than the seasonally adjusted 40.1 percent registered in December. Economists had expected a reading of 39.0 percent.

The service sector represents about 80 percent of economic activity, including businesses such as banks, airlines, hotels and restaurants. Analysts welcomed the bounce of the index as a possible positive economic signal.

In another report, job losses in the private sector slowed slightly in January, according to the ADP Employer Services. US private employers cut 522,000 jobs in January compared to 659,000 jobs in December. Economists had expected 530,000 private sector job cuts in January.

Fitch Ratings, a major ratings agency, cut Russia's foreign and local currency ratings by one notch to BBB, or two rankings above junk on Wednesday. The report pushed the euro lower as Russia may have to sell off euros to balance its portfolio of currencies.

The pound rose slightly against the dollar as a report showed that the UK's service sector activity contracted at a slower pace in January. The Purchasing Managers' Index for the service sector rose to 42.5 in January from 40.2 in December, the Chartered Institute of Purchasing and Supply said.

The European Central Bank (ECB) and the Bank of England are due to update their monetary policies on Thursday. Analysts have predicted that the Bank of England would cut its key interest rate, which stands at a historic low of 1.5 percent, by up to 1 percentage point. The European Central Bank was expected to keep its key rate unchanged at 2 percent.

The euro bought 1.2856 dollars in late New York trading compared with 1.3007 dollars late Tuesday. The pound rose to 1.4461 dollars from 1.4421 dollars.

The dollar fell to 1.2318 Canadian dollars from 1.2347 Canadian dollars, and rose to 1.1584 Swiss francs from 1.1446 Swiss francs. It rose to 89.54 Japanese yen from 89.26 Japanese yen.

(Xinhua News Agency February 5, 2009)