The dollar climbed against the yen for a second day before U.S. data that analysts said will show jobs growth picked up in the world’s largest economy.
Bullish option bets on the dollar against the Japanese currency advanced to a five-month high relative to bearish wagers. The greenback rose against 11 of its 16 major peers, having fallen against most of them this week after the Federal Reserve reinforced its commitment to record-low borrowing costs. South Africa’s rand pared a weekly gain.
“Markets are going into the report looking for a good number,” Ian Stannard, the head of European currency strategy at Morgan Stanley in London said, referring to the U.S. jobs data. “It may make it difficult for a positive surprise to be generated. However, even if we see a weaker print, I think any dollar setback will be temporary.”
The dollar traded 0.2 percent higher at 102.48 yen as of 6:30 a.m. New York time, extending its advance this week to 0.3 percent. It was 0.1 percent stronger at $1.3861 per euro, paring its drop to 0.2 percent since April 25. Europe’s common currency was little changed at 142.04 yen.
The U.S. Labor Department will say payrolls increased by 218,000 in April, up from a gain of 192,000 the previous month, according to a Bloomberg survey of economists before the report today.
The overnight risk-reversal rate was at 0.65 percentage point, the highest since November on a closing-price basis.
“A good number on the U.S. jobs report is likely to result in dollar buying,” said Masato Yanagiya, the head of foreign exchange and money trading in New York at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “Markets are seeing an upside risk to the employment data.”
The Fed said on April 30 that it will keep the benchmark rate close to zero for a “considerable time” after its bond-buying program ends. It cut monthly purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.
There are $1.1 billion of dollar-yen call options expiring today with a 103.25 yen strike price and $2 billion of options that may be exercised at 104, according to data from the Depository Trust & Clearing Corporation compiled by Bloomberg.
“There seems to be above-average interest in top-side strikes in dollar-yen options,” said Ray Attrill, the global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “If you want to punt on payrolls being U.S. dollar positive, then dollar-yen is probably one of the more sensitive pairs to an upside surprise.”
This week, the rand and Hungary’s forint have led gains among the greenback’s 31 major peers, each rising more than 1.2 percent. The euro has advanced 0.2 percent, while the yen lost 0.3 percent. South Africa’s currency slid 0.3 percent today to 10.5122 per dollar.
Deutsche Bank AG’s volatility index, a measure of trader expectations for future currency fluctuations based on three-month options for nine major currency pairs, was at 5.99 percent after falling to 5.84 percent yesterday, the lowest since July 2007.
“Policy rates stuck close to the zero bound in the U.S., euro area, U.K. and Japan are to blame” for the low volatility, Sebastien Galy, a senior currency strategist at Societe Generale SA in New York, wrote in an e-mailed note yesterday. “This is good” for emerging-market currencies.
Analysts forecast the European Central Bank and the Bank of England will maintain their benchmark borrowing costs at 0.25 percent and 0.5 percent, respectively, at their next policy announcements on May 8. The Bank of Japan switched its main policy tool in April last year to setting the amount of money that it provides from adjusting interest rates.
Indonesia’s rupiah rose 0.4 percent to 11,523 per dollar, set for its first weekly advance in a month. Data today showed inflation slowed in April to the least since June and exports exceeded imports for a second month in March.
“The fundamentals are improving and investors are chasing real interest rates offered by Indonesian bonds as inflation slows,” said Mika Martumpal, the head of treasury research and strategy at PT Bank CIMB Niaga in Jakarta. “As long as the trade balance is in surplus, the rupiah should be supported.”
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