Wednesday, 5 June 2013

Dollar Volatility Near 6-Week High Against Yen Before Jobs Data

By Mariko Ishikawa & Kevin Buckland - Jun 6, 2013 5:51 AM GMT+0400
The dollar’s volatility against the yen was near the highest in six weeks before U.S. jobs data that may show whether the economic recovery is strong enough for the Federal Reserve to curb monetary stimulus.
The greenback rallied from the lowest level in almost a month versus the Japanese currency before U.S. data this week forecast to show the number of applications for unemployment benefits fell and payrolls increased. A private report yesterday showed U.S. companies hired fewer workers than economists projected, and Japanese Prime Minister Shinzo Abe failed to provide additional detail on stimulus measures. Australia’s dollar slid to a more than one-year low.
Dollar Reaches Month Low on Jobs Data, Fed Outlook; Aussie Falls The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, dropped 0.2 percent to 82.594 yesterday. Photographer: Scott Eells/Bloomberg
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“We expect the yen to weaken going forward,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “Should the Fed reduce stimulus, U.S. Treasury yields will rise and the currencies of countries easing monetary policy will be sold and those of nations tightening will be bought.”
The dollar gained 0.2 percent to 99.25 yen at 10:47 a.m. in Tokyo from yesterday, when it dropped 1 percent. It earlier touched 98.86, the lowest since May 9. The currency pair’s one-month implied volatility was at 13.50 percent after reaching 14.2225 on June 4, the highest since April 22.
The euro was little changed at $1.3094 from yesterday when it reached $1.3116, the highest since May 9. The shared currency gained 0.2 percent to 129.94 yen.

Dollar Index

The Aussie dollar declined 0.4 percent to 95.05 U.S. cents after trading at 94.71, a level unseen since October 2011. Australia’s currency sank to as low as 93.86 yen, the weakest since Feb. 27.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, was little changed at 82.562.
The MSCI Asia Pacific Index of shares slid 0.4 percent after plunging 1.8 percent yesterday. Japan’s Nikkei 225 Stock Average rose 0.5 percent, erasing earlier losses.
Implied volatility of three-month options of Group of Seven currencies was at 10.17 percent, after touching 10.24 on June 3 and May 31, the highest since Feb. 26, according to the JPMorgan G7 Volatility Index.

Fed Prospects

Figures from the Roseland, New Jersey-based ADP Research Institute showed yesterday that U.S. companies boosted employment by 135,000 workers in May. The median forecast of economists surveyed by Bloomberg News was 165,000.
The Labor Department reported last month that U.S. nonfarm payrolls swelled by 165,000 jobs in April, more than forecast, and the unemployment rate unexpectedly fell to 7.5 percent. It will probably say tomorrow that employers added 165,000 workers in May, another survey showed.
Economists in a separate poll estimate that a Labor Department report today will showapplications for jobless benefits slid by 9,000 to 345,000 in the week ended June 1.
The Fed is buying $85 billion of Treasury and mortgage bonds each month to put downward pressure on borrowing costs under its quantitative-easing stimulus strategy. Chairman Ben S. Bernanke said on May 22 that the Fed could consider reducing the purchases within “the next few meetings” if officials see signs of sustained improvement in the labor market.
“I think people have actually misread Bernanke’s comments,” Steve Brice, the chief investment strategist at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview. Fed policy makers “are moving towards a tapering of QE, but we just feel the data is not quite there yet.”

Yen Flows

The European Central Bank will leave its benchmark interest-rate unchanged when it meets today, according to 57 of 59 economists in a Bloomberg survey. The central bank cut borrowing costs by 25 basis points to an all-time low of 0.5 percent on May 2.
Japanese investors were net sellers of 1.17 trillion yen ($11.8 billion) in overseas bonds and notes during week ended May 31, the largest amount since April 6, 2012, according to figures released by the Ministry of Finance in Tokyo today.
The yen rallied yesterday after Japan’s Abe failed to provide additional detail on stimulus measures. He said a legislative campaign to loosen rules on businesses won’t begin for months as he outlined his “third arrow” of a revival plan that seeks to build on fiscal and monetary stimulus.
“We still remain short the yen,” Nick Maroutsos, the Sydney-based managing director and co-founder of Kapstream Capital, which oversees about $6 billion, said in a Bloomberg Television interview. “The volatility in Japan is purely a result of the third arrow that Abe threw out yesterday, and it obviously missed the mark, at least from what market participants are thinking.”
To contact the reporters on this story: Mariko Ishikawa in Tokyo at; Kevin Buckland in Tokyo at
To contact the editor responsible for this story: Rocky Swift at