The dollar traded at almost a one-month low against the yen as a partial shutdown of the U.S. government delayed a jobs report, clouding the outlook for when the Federal Reserve may reduce stimulus.
The Bloomberg U.S. Dollar Index reached the lowest level in two weeks as Atlanta Fed President Dennis Lockhart said the shortage of economic news “would tend to make me somewhat more cautious” about reducing the pace of bond purchases. Lawmakers also need to agree on raising the debt limit. The pound fell against most its 16 major counterparts on speculation recent gains were excessive. Australia’s dollar rose on bets the central bank will refrain from cutting interest rates.
“The longer the shutdown lasts, the bigger economic impact it has,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a telephone interview. “The debt-ceiling issue is potentially much more disruptive for the financial markets. Because the dollar already had a weak September, short positions started building up. They built up a little bit more this week.” A short refers to a bet that an asset will fall.
The dollar rose 0.2 percent to 97.48 yen at 5 p.m. in New York, trimming this week’s decline to 0.8 percent. It touched 96.96, about the lowest since Aug. 28. The U.S. currency rose 0.5 percent to $1.3558 per euro. The yen strengthened 0.2 percent to 132.14 per euro.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, rose 0.2 percent to 1,009.98 after falling to the lowest since Sept. 19.
Malaysia’s ringgit rallied to almost two-week high. The currency rose 0.4 percent to 3.1827 versus the dollar. Chile’s peso gained 0.3 percent to 499.22 against the greenback, touching its strongest level since Sept. 23.
Options traders raised bets on price swings between the dollar and the euro to the most in almost four weeks.
One-month implied volatility for the pair, based on option prices, rose to 7.72 percent on Oct. 2, the highest since Sept. 9. It was at 7.34 percent today, up from 6.57 percent on Sept. 19, which was the lowest since October 2007.
Dollar weakness “obviously was trigged by the government shutdown, but the big issue markets are concerned about right now is really discussions around the debt ceiling,” Sireen Harajli, a strategist at Mizuho Bank in New York, said in a telephone interview. “The markets are being a little bit more cautious ahead of the weekend.”
The pound fell for a second day against the dollar, after reaching a nine-month high this week, amid speculation the U.K. economic recovery isn’t strong enough to warrant an early interest-rate increase.
Bank of England policy makers, who are due to meet next week, have said they will keep the benchmark interest rate at a record low until unemployment falls to 7 percent. The jobless rate was 7.7 percent in the second quarter.
“Some of the momentum in the early rate hike argument has been lost,” said Jane Foley, senior currency strategist at Rabobank International in London. “People are taking off some of their long positions, in case we see a negative shock,” she said, referring to bets an asset will gain.
The pound slid 0.9 percent to $1.6010 after rising to $1.6260 on Oct. 1, the highest level since Jan. 2.
The Aussie strengthened before an industry report next week on service activity in China, the South Pacific nation’s biggest trading partner.
The Reserve Bank left its benchmark interest rate at 2.5 percent on Oct. 1, saying earlier cuts are still filtering through the economy and already driving up asset prices.
“We’ve shifted up our year-end forecast for the Australian dollar,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., which sees the Aussie at 95 U.S. cents by Dec. 31 from 92 cents previously. “Australian households are showing less signs of risk aversion.”
Australia’s currency gained 0.4 percent to 94.35 U.S. cents, having appreciated 1.3 percent this week.
The first partial shutdown of the U.S. government in 17 years has delayed three economic releases this week, including the monthly payrolls report and the official jobless rate, which had been scheduled for release today.
“Less data is not helpful in gauging where the economy is and where it’s going,” the Fed’s Lockhart said yesterday in Atlanta. If the shutdown lasts until the Fed’s next meeting on Oct. 29-30, “it would be very hard to make a decision” about reducing quantitative easing, he said.
Trading in over-the-counter foreign-exchange options totaled $22.2 billion, compared with $30 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 $5 billion, the largest share of trades at 22 percent. Options on the euro-dollar rate totaled $3 billion, or 14 percent.
Dollar-yen options trading was 7 percent less than the average for the past five Fridays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was 34 percent more than average.