The Dollar Index fell from a more than one-month high as traders speculated whether the U.S. jobs report for June will be strong enough to move the Federal Reserve closer to slowing monetary stimulus.
The yen climbed against the most major currencies amid renewed speculation Europe’s sovereign-debt crisis is worsening as Portugal’s bonds slumped after two ministers resigned from the government. The pound rallied after U.K. services expanded, while Australia’s dollar slid after central-bank Governor Glenn Stevens said the economy “will probably get” a weaker currency if needed.
“This is just one more piece of data in a long line that the Fed will look at to make a decision about whether or not tapering makes sense,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said of the jobs report in a telephone interview.
The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six major U.S. trading partners, dropped 0.4 percent to 83.211 at 5 p.m. in New York after increasing earlier to 83.717, its strongest level since May 29.
The yen appreciated 0.7 percent to 99.91 per dollar after gaining as much as 1.4 percent earlier, its biggest intraday advance since June 14. Japan’s currency strengthened 0.5 percent to 129.97 per euro. The dollar fell 0.2 percent to $1.3009 to the European currency after rising 0.4 percent earlier.
The pound jumped the most in four weeks versus the dollar after a report showed U.K. services growth accelerated in June, adding to evidence the economic recovery is gaining strength.
Britain’s currency advanced against all of its 16 most-traded peers as reports this week showed manufacturing grew at the fastest in more than two years last month and construction expanded. Mark Carney began as governor of the Bank of England on July 1 and will announce his first policy decision tomorrow.
“The numbers were a positive surprise, and the pound is showing some strength,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “These are levels at which you don’t talk about a weak economy anymore.”
Sterling rose 0.8 percent, the most since June 6, to $1.5283 and gained 0.6 percent to 85.14 pence per euro.
Australia’s dollar weakened against most major counterparts and touched the lowest in almost three years against the greenback after Stevens said the Aussie has been too high. The currency sank 0.7 percent to 90.87 U.S. cents and reached 90.37 cents, the weakest since September 2010.
Initial claims for jobless benefits in the U.S. fell by 5,000 last week to 343,000, the Labor Department said today. A Bloomberg survey forecast a decline to 345,000. The ADP Research Institute said American companies boosted employment by 188,000 workers in June, exceeding a Bloomberg survey’s forecast of a gain of 160,000.
The Labor Department report on July 5 may show U.S. nonfarm payrolls increased by 165,000 jobs, a Bloomberg survey forecast.
The U.S. central bank buys $85 billion of Treasuries and mortgage bonds each month to put downward pressure on borrowing costs and fuel growth. Fed Chairman Ben S. Bernanke said June 19 policy makers may slow the purchases this year and end them in 2014 if economic growth meets policy makers’ goals.
U.S. financial markets are closed tomorrow for the Independence Day holiday.
Portugal’s 10-year bond yield jumped above 8 percent for the first time since November after Prime Minister Pedro Passos Coelho told voters in a televised speech from Lisbon yesterday he’s trying to hold his government together.
Portuguese Foreign Affairs Minister Paulo Portas, leader of junior coalition party CDS, quit yesterday in protest at the government’s budget policy. Finance Minister Vitor Gaspar also stepped down this week, saying his credibility had been compromised by the government’s failure to meet budget targets set by the European Union.
“Any time you have any sort of political uncertainty or anything that’s going to disrupt political stability, it’s going to be risk-off for the underlying currency,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, in a phone interview. “That’s weighing on the euro.”
The premium for one-year options granting the right to sell the euro against the dollar relative to those allowing for purchases increased to 1.94 percentage points, the most since Sept. 12, the 25-delta risk reversal shows.
The euro has still gained 4.8 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar climbed 6.5 percent, the best performer, and the yen tumbled 9 percent.
“In a global risk-off environment, particularly when things are being triggered by say European events or events in the Middle East, I think the dollar will perform very well,” Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee. “It’s very much a case of long dollar for me.” A long position is a bet an asset will increase in value.
Trading in over-the-counter foreign-exchange options totaled $33 billion, compared with $36 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $6.8 billion, the largest share of trades at 21 percent. Euro-dollar options totaled $4.3 billion, or 13 percent.
Dollar-yen options trading was 12 percent below the average for the past five Wednesdays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was 15 percent above average.
JPMorgan Chase & Co.’s Group of Seven Volatility Index, based on currency-option premiums, increased to 11.15 percent, from 10.97 percent yesterday. It touched 11.96 percent June 24, the highest since January 2012. The 2013 average is 9.5 percent.