Dollar Holds Advance Before U.S. Jobs Data; Volatility Slides

The Bloomberg U.S. Dollar Index held a gain from yesterday before a report analysts said will show employers last month added the most jobs since April, boosting the case for the Federal Reserve to cut its stimulus program.

The greenback rose against the yen before the data, which was delayed by a 16-day government shutdown. Chicago Fed President Charles Evans said the disruption will probably cause the central bank to delay plans to taper its stimulus program that tends to debase the dollar. A gauge of currency-market volatility slid to the least since January. Norway’s krone slid as SEB AB revised down its forecast for Norwegian growth.

“Attention is on the payrolls report, and the dollar is in focus,” said Antje Praefcke, a senior currency strategist at Commerzbank in Frankfurt. “The number needs to be very, very good to change the market perception of the impact of the shutdown. With the focus on U.S. monetary policy, many people have changed their expectations regarding the Fed’s stimulus and that means a weaker dollar.”

The Bloomberg U.S. Dollar Index climbed less than 0.1 percent to 1,004.95 at 6:43 a.m. New York time after advancing 0.2 percent yesterday. The gauge reached 1,002.65 on Oct. 17, the lowest close since Feb. 19.

The U.S. currency was little changed at $1.3673 per euro, after touching $1.3704 on Oct. 18, the weakest since Feb. 1. The greenback rose 0.2 percent to 98.38 yen. The Japanese currency fell 0.1 percent to 134.50 per euro after reaching 134.54, the weakest since Sept. 23.

Payroll Report

Payrolls rose by 180,000 last month, the most since April, after a 169,000 gain in August, according to the median forecast of economists surveyed by Bloomberg. The report was originally slated for Oct. 4 and will instead be released by the Labor Department at 8:30 a.m. in Washington.

The shutdown may have trimmed fourth-quarter growth by 0.6 percent, according to Standard & Poor’s. Fed policy makers will probably wait until March to begin trimming stimulus, a Bloomberg survey of analysts showed last week. A separate survey last month forecast the first reduction would be in December.

“It may be easier to dismiss a strong release as relating to a pre-shutdown economy and, as such, a weak report would probably provoke a larger market reaction,” Adam Cole, head of Group-of-10 currency strategy at Royal Bank of Canada wrote in a note to clients.

Volatility Index

JPMorgan Chase & Co.’s G-7 FX Volatility Index fell to 7.60 percent, the lowest level since Jan. 8. One-month implied volatility for the dollar-yen rate slid to 8.91 percent, the least since Jan. 4.

“Investors are hesitant to take positions ahead of the U.S. jobs data,” said Noriaki Murao, the New York-based managing director of the marketing group for financial markets at Bank of Tokyo-Mitsubishi UFJ Ltd.

The U.S. dollar declined 2.8 percent in the past three months, making it the second-worst performer in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Norway’s krone is the worst performer, declining 3.1 percent. The euro climbed 1.2 percent, while the yen slid 1.3 percent.

Norway’s krone weakened after SEB AB said in a note to clients that mainland gross domestic product will grow 1.8 percent in 2013, 0.3 percentage point below a previous forecast released in August. The nation’s central bank will raise interest rates in September rather than in June, analysts at the Swedish bank wrote.

“The revisions are first and foremost due to slower growth in private consumption, which nonetheless should pick up somewhat in 2014,” the analysts wrote. “Norges Bank is likely to broadly stick to its current assessment at the two remaining meetings this year. While we still expect a hike next summer, we now see a move in September as most likely and subsequent hikes should be very gradual.”

The krone slid 0.5 percent to 5.9496 per dollar and depreciated 0.4 percent to 8.1345 per euro. Sweden’s krona declined 0.2 percent to 6.4095 per dollar.

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