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Yellen Spurs Dollar Bargain in Payrolls Quirk: Chart of the Day

Federal Reserve Chair Janet Yellen. Photographer: Andrew Harrer/Bloomberg
Federal Reserve Chair Janet Yellen. Photographer: Andrew Harrer/Bloomberg

Aug. 7 (Bloomberg) -- An “anomaly” in dollar-yen trading just before and after the release of the U.S. monthly payrolls report represents an opportunity for investors to buy the dollar against the yen, according to Mizuho Securities Co.

The CHART OF THE DAY shows the greenback rising against the yen in the run-up to the past six U.S. Labor Department reports before retreating after the release. Janet Yellen has been saying since taking over as Federal Reserve Chair in February that there’s room for jobs market improvement and the benchmark interest rate will remain low for a “considerable time.”

“Because Yellen has been pointing out the slack in the labor market, the market isn’t buying into dollar-yen with conviction after the headline payrolls numbers,,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities in Tokyo. “Dips in the dollar we’ve observed during these anomalies may prove to be good buying opportunities.”

Mizuho predicts the dollar will drop toward 101 yen before rebounding to 108 by year-end. The currency touched the highest since April 8 at 103.09 on July 30, two days before a Labor Department report showed employment increased to 209,000 last month, trailing the median estimate for 230,000 in a Bloomberg News survey of economists. The greenback has fallen since to trade at 102.10 yen yesterday in New York.

August has been the dollar’s worst month against the yen between 2000 and 2013, weakening an average of 1.3 percent, according to data compiled by Bloomberg. The Fed cut monthly bond purchases by $10 billion for a sixth consecutive meeting last month to $25 billion. The next policy decision is due on Sept. 17.

“The month of August, when a large amount of Treasuries tend to come due, demonstrates a marked trend for dollar weakness,” said Suzuki. “If it falls again this year, it would be a good opportunity to buy the dollar in the longer term. The end to tapering in October is inevitable. Once dollar-yen starts moving, it would climb up very quickly.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net

To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Nicholas Reynolds

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