Dollar pivots to gains as equities steady

NEW YORK (Reuters) - The dollar rose on Wednesday as fragile global stock markets steadied and U.S. hiring data encouraged speculation that Federal Reserve policymakers will raise interest rates later this month.

Stock market gains, including a rise of about 1 percent <.spx> in early Wall Street trading, slowed a rush to unwind carry trades that have boosted the safe-haven yen and the low-yielding euro in the past few weeks. Both fell against the dollar on Wednesday.

China's slowing and worries about global growth had prompted investors to cut unfavorable bets in the yen and the euro, both of which have been popular for funding trades involving the sale of low-yielding currencies to buy riskier, higher-yielding assets.

The dollar index <.dxy>, a measure of six major currencies valued against the greenback, was last up 0.40 percent and had added to gains when payrolls processor ADP reported that U.S. private payrolls increased 190,000 last month.

While that was below economists' expectations for a gain of 201,000 jobs, it was a step up from the 177,000 positions created in July and was followed by government data showing nonfarm productivity advanced at its fastest pace in 1-1/2 years during the second quarter.

"The data lean in the direction of a rate hike," said David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut.

The chances of an interest rate hike this month, which would add to the allure for investors of dollar-denominated assets, had been dulled by a global stock market selloff following poor economic data from China.

The dollar was last up 0.75 percent at 120.10 yen , rising from a low of 119.225 yen as calm returned to equity markets. The yen had jumped about 1.6 percent on Tuesday when global stocks fell sharply.

With eyes also on Thursday's European Central Bank meeting, the euro fell 0.6 percent to $1.1210 , having rallied 0.9 percent on Tuesday when it rose to $1.1332.

The dollar gained more than 1 percent against the Swiss franc to 0.9680 francs.

Meanwhile, the Australian dollar earlier hit a 6-1/2-year low of $0.6982, pummeled by sliding oil and commodity prices. Its decline was accelerated by weaker-than-expected domestic growth in the second quarter due to falling exports, and it was last trading flat at $0.7021.

China is a big export market for Australia and the Aussie is used as a liquid proxy for exposure to that country.

(Reporting By Michael Connor in New York; Editing by Meredith Mazzilli)