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Dollar Gains From Eight-Month Low Before Jobs Report

The dollar rose from an eight-month low amid speculation a government report tomorrow will show U.S. employment rose more than forecast, weakening the case for the Federal Reserve to put off reducing stimulus.

The yen fell versus most major peers as Bank of Japan Governor Haruhiko Kuroda said policy easing, which tends to debase a currency, will go on until inflation reaches 2 percent, even as data showed Japanese export growth slowed. Chile’s peso slid after an unexpected cut in interest rates. The U.S. added 180,000 jobs in September, tomorrow’s data is forecast to show. The report was delayed by the partial government shutdown.

“We’ve seen this tendency for safety trades ahead of big numbers this year,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a phone interview. “Markets are short dollars, especially against the likes of the euro, sterling. There’s an element of caution, of taking back risk and positioning ahead of the numbers.” A short position is a bet that a currency will fall in value.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 other major currencies, rose 0.2 percent to 1,004.55 at 5 p.m. in New York. The gauge fell to 1,000.70 on Oct. 18, the lowest intraday level since Feb. 13, extending a weekly loss to 1 percent, the most in a month.

The yen fell 0.5 percent to 98.19 per dollar after gaining 1.1 percent during the previous two days. Japan’s currency declined 0.4 percent to 134.32 per euro and touched 134.38, the weakest level since Sept. 23. The dollar was little changed at $1.3681 per euro after gaining 0.3 percent earlier.

Low Volatility

A gauge of price swings was at the lowest level in more than nine months. JPMorgan Chase & Co.’s Global FX Volatility Index touched 7.73 percent, matching Oct. 18’s low, the least since Jan. 9, before trading at 7.75 percent. The average this year is 9.33 percent.

Chile’s peso dropped against most of 31 major counterparts, losing 1 percent to 501.95 per dollar after the central bank unexpectedly lowered the benchmark rate by a quarter-percentage point on Oct. 17.

The South African rand fell for the first time in four days against the dollar amid speculation that Finance Minister Pravin Gordhan will revise fiscal targets this week. The rand depreciated 0.6 percent to 9.8429, retreating from a one-month high of 9.7431 it reached on Oct. 18.

The job-growth forecast of economists surveyed by Bloomberg News compares with a gain of 169,000 positions in August. It would be the highest since April, indicating the economy was gaining momentum before fiscal gridlock forced some federal agencies to close for 16 days, starting Oct. 1. The jobless rate held at 7.3 percent, economists estimated.

The report, originally due Oct. 4, was postponed due to the government shutdown.

Fed Purchases

The Fed will maintain its monthly bond purchases under the quantitative-easing stimulus strategy at $85 billion until March, according to the median estimate of 40 economists in a Bloomberg survey conducted Oct. 17-18. A survey last month forecast the first reduction would be in December.

The central bank unexpectedly refrained in September from tapering the pace of its buying, saying it wanted more evidence of an economic recovery.

President Barack Obama said last week the U.S. government shutdown “inflicted completely unnecessary damage” on the economy, while a last-minute deal in Congress to temporarily lift the debt ceiling concentrated attention on the next fiscal hurdle in December. Fed officials have cited the standoff as a reason to postpone slowing monetary stimulus.

Weaker Dollar

“The medium-term outlook is for a weaker U.S. dollar, as the Fed is likely to delay tapering,” said Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York. “A source of the dollar’s rebound today could be short covering ahead of tomorrow’s employment report, which is expected to show improvement in September. The risk is for stronger-than-expected labor data, which may cause markets to reassess tapering expectations.”

The euro’s climb versus the dollar will be sustained as the Fed’s decision to delay tapering asset purchases attracts investment flows into Europe, according to Alberto Gallo of Royal Bank of Scotland Group Plc.

“We’re positioned for a euro rally for the next few months,” London-based Gallo, the head of European macro-credit research at RBS, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee.

Japan’s Exports

Japanese exports increased 11.5 percent in September from a year earlier, the least in three months, the finance ministry said. That compared with a forecast of 15.6 percent in a Bloomberg News survey.

It’s too early to discuss an exit strategy for the BOJ’s monetary easing, Kuroda said today at a central bank branch managers’ meeting in Tokyo.

The yen tumbled 11 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 5.9 percent this year and the dollar advanced 1.7 percent, the indexes show.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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