FOREX-Dollar hits seven-week highs before payrolls

* U.S. trade deficit narrows, capital goods orders rise

* Employment number on Friday in focus

* Euro falls after ECB meeting (Adds stocks move, quote; updates prices)

By Karen Brettell

NEW YORK, Oct (Shenzhen: 000069.SZ - news) 5 (Reuters) - The U.S. dollar index rose to seven-week highs on Thursday as data pointed to solid U.S. growth, a day before Friday's highly anticipated jobs report for September.

The U.S. trade deficit fell in August as exports of goods and services rose to the highest level in more than 2-1/2 years, while the number of Americans filing for unemployment benefits fell more than expected last week.

New (KOSDAQ: 160550.KQ - news) orders for U.S.-made goods rose in August and orders for core capital goods were stronger than previously reported, suggesting robust business spending could help offset some of the economic drag of Hurricanes Harvey and Irma.

“There’s been positive data in the U.S. this morning, that’s been supportive of the dollar,” Sireen Harajli, foreign exchange strategist at Mizuho in New York, said.

The dollar index, a basket of six major currencies rose to 93.989, the highest level since August 17.

The greenback was also supported by higher Treasury yields as U.S. stock indices hit record highs.

Improving U.S. data along with the prospect of U.S. tax cuts and the likelihood that the Federal Reserve will raise interest rates in December have boosted the U.S. currency in recent weeks.

The rally paused earlier this week, however, on caution that Friday's employment report will be adversely impacted by recent hurricanes.

“I think we will probably see a stronger reaction if we get a better-than-expected number because it will firm up expectations that the FOMC will go ahead and tighten policy in December and beyond,” Harajli said.

"If we get a weaker number it might just be brushed off as negative impacts of the hurricane," she added.

Interest rate futures traders are now pricing in an 86 percent likelihood of a December rate hike, up from 78 percent a week ago, according to the CME Group (Kuala Lumpur: 7018.KL - news) ’s FedWatch Tool.

The euro was also hurt after European Central Bank meeting minutes were interpreted as slightly dovish.

ECB policymakers last month debated the trade-off between various options for extending its asset buying, with some arguing that a reduction was warranted in any scenario.

The single currency was last down 0.51 percent against the greenback at $1.1699. (Editing by Susan Thomas and Cynthia Osterman)