Dollar Stays Higher Against Euro Before FOMC Minutes; Yen Gains

The dollar remained stronger against the euro following a three-week rally before the U.S. central bank releases minutes this week of the Federal Open Market Committee’s March meeting.

Leveraged funds boosted bearish bets on the U.S. currency to the most in almost four years last week, spurring speculation it will strengthen as some of those positions are reversed. Federal Reserve Bank of St. Louis President James Bullard is due to speak today. Australia’s dollar fell with a report predicted to show on April 10 the jobless rate rose. The yen gained on demand for haven assets and as stocks declined.

The minutes may add “more color around why they shifted the guidance for the eventual tightening in a more hawkish direction,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “When positioning is extremely short, to me that’s a signal that there’s more risk that they buy back those shorts,” he said, referring to bets on a decline in the dollar.

The dollar was at $1.3708 per euro as of 7 a.m. in London after strengthening 0.3 percent last week to $1.3705. The yen added 0.2 percent to 103.08 per dollar, extending a 0.6 percent advance on April 4. It gained 0.2 percent to 141.30 per euro, following a 0.7 percent jump at the end of last week to 141.54.

Leveraged funds held 34,199 more contracts betting on a decline than wagers on a gain in IntercontinentalExchange Group Inc.’s Dollar Index as of April 1, data from the Commodity Futures Trading Commission in Washington show. That’s the most since the figures became available in July 2010.

Fed Minutes

The Fed is due to release on April 9 minutes of its March 18-19 meeting at which it reduced the monthly pace of bond buying by $10 billion to $55 billion. Fed Chair Janet Yellen said at that time that the central bank may start to raise borrowing costs “around six months” after ending its asset-purchase program.

There are 987.5 million euros ($1.35 billion) of euro-dollar options expiring today at a $1.37 strike price, according to data from The Depository Trust & Clearing Corporation compiled by Bloomberg.

Treasuries gained and the yen strengthened against the dollar on April 4 after U.S. Labor Department data showed payrolls rose 192,000 last month, compared with the 200,000 increase estimated by economists in a Bloomberg News survey. A decline in U.S. bond yields typically damps the allure of the greenback for Japanese investors.

“The jobs data confirmed the moderate recovery in the U.S. economy, but market expectations had been way too high,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities Co. in Tokyo. “I can’t foresee much buying pressure for the yen before the BOJ concludes the meeting.”

BOJ Outlook

The Bank of Japan may double purchases of exchange-traded funds in coming months, according to a Bloomberg News survey of economists. The BOJ will leave policy unchanged at the meeting that concludes tomorrow, its first since the government raised the sales tax on April 1, the survey shows.

The Topix (TPX) index of Japanese equities declined 1.6 percent in Tokyo trading, its biggest drop since March 20. The MSCI Asia Pacific Index fell 0.5 percent.

Australia’s dollar declined 0.1 percent to 92.79 U.S. cents after touching 93.08 on April 4, the strongest level since Nov. 21. The statistics bureau is forecast to say this week that the nation’s unemployment rate rose to 6.1 percent in March from 6 percent in February, according to a Bloomberg survey.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Jonathan Annells, Naoto Hosoda

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