(fxcue news) - The U.S. dollar climbed higher on Thursday as data showing a stronger than expected jump in U.S. service sector activity in the month of September dimmed prospects of any aggressive reduction in interest rate cuts by the Federal Reserve in the coming months. Safe haven buying of the currency amid rising tensions in the Middle East due to the war between Israel and Iran contributed as well to the greenback's move up north. According to the report released by the Institute for Supply Management said that its services PMI shot up to 54.9 in September from 51.5 in August. Economists had expected the index to inch up to 51.7. The increase marked the PMI's highest level since hitting 55.0 in February 2023. The jump by the headline index reflected significantly faster growth by new orders and business activity, as the new orders index surged to 59.4 in September from 53.0 in August and the business activity index spiked to 59.9 in September from 53.3 in August. Meanwhile, the employment index fell to 48.1 in September from 50.2 in August, suggesting a downturn by employment in the service sector. The report also said the prices index rose to 59.4 in September from 57.3 in August, indicating a faster pace of price growth. Data from the Labor Department showed initial jobless claims in the U.S. rose to 225,000 in the week ended September 28th, an increase of 6,000 from the previous week's revised level of 219,000. Economists had expected jobless claims to inch up to 220,000 from the 218,000 originally reported for the previous week. The bigger than expected rebound came a week after jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th. Investors looked ahead to the release of the Labor Department's closely watched monthly jobs report on Friday. Economists currently expect the report to show employment rose by 140,000 jobs in September after climbing by 142,000 jobs in August, while the unemployment rate is expected to hold at 4.2%. The data could impact the outlook for the U.S. economy as well as expectations regarding how aggressively the Federal Reserve will lower interest rates. With the jobs data looming, CME Group's FedWatch Tool is currently indicating a 63% chance the Fed will lower rates by a quarter point and a 37% chance of another half point rate cut. The dollar index climbed to 102.10 around mid morning, and despite easing to 101.98 later on, remained well above the flat line, gaining 0.3%. Against the Euro, the dollar firmed to 1.1030 from 1.1045. Against Pound Sterling, the dollar strengthened to 1.3124, gaining from 1.3266. The dollar climbed against the Japanese currency, fetching 146.91 yen a unit, compared to 146.46 yen a unit on Wednesday evening. Against the Aussie, the dollar strengthened to 0.6843. The dollar firmed against Swiss franc to CHF 0.8526 from CHF 0.8498. Against the Loonie, the dollar climbed to C$ 1.3556 from C$ 1.3504.