Dollar-Yen Volatility Near Record Low Before U.S. Spending, BOJ

A gauge of expected price swings in the dollar versus the yen remained near a record low as traders awaited this week’s data on U.S. consumer spending and a policy decision from the Bank of Japan.

The Bloomberg Spot Dollar Index, which gauges the greenback against 10 major peers, rose for a second day yesterday after Federal Reserve Bank of Boston President Eric Rosengren said economic growth will pick up in the second half amid “pretty strong” consumption. The Aussie dollar was near a three-week high as China’s central bank announced measures to support smaller companies and agriculture, bolstering the outlook for growth in Australia’s largest trading partner.

“The dollar overall is bid,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Unless there’s big surprise from the retail sales data, we’ll likely see dollar-yen remain in a range ahead of the Fed meeting” on June 17-18.

The dollar slipped 0.2 percent to 102.38 yen at 11:23 a.m. in Tokyo. One-month implied volatility in the pair was at 5.42 percent after touching a record low of 5.25 percent yesterday.

The euro fetched $1.3590 from $1.3594, after touching $1.3503 on June 5, the lowest since Feb. 6. It declined 0.2 percent to 139.10 yen after weakening 0.3 percent yesterday.

Retail sales in the U.S. increased 0.6 percent in May following a 0.1 percent advance the previous month, the Commerce Department is forecast to say June 12, according to the median forecast of economists surveyed by Bloomberg News.

Stronger Growth

“We are going to see a stronger second half” for U.S. economic growth, Rosengren said yesterday. “I don’t see significant financial concerns at this time,” he said, referring to stability in financial markets.

The Fed is cutting back on bond purchases it has used to keep borrowing costs low amid signs the economy is improving. Policy makers have kept the benchmark interest rate at a record zero to 0.25 percent since December 2008.

BOJ Governor Haruhiko Kuroda will hold a press conference after the central bank’s next policy decision on June 13.

Australia’s dollar was little changed at 93.57 U.S. cents after reaching 93.64 yesterday, the strongest since May 19.

The People’s Bank of China announced a 0.5 percentage point cut in reserve requirements for some banks. The reduction will take effect June 16, it said in a statement yesterday.

China’s inflation accelerated in May to the fastest pace in four months on food costs, while a decline in factory-gate prices moderated, data today showed. Consumer prices rose 2.5 percent from a year earlier, exceeding the median 2.4 percent estimate in a Bloomberg survey.

“The growth-supportive policy intention of the authorities looks clear,” David de Garis, a senior economist at National Australia Bank Ltd. in Melbourne, wrote in a note to clients today. The Aussie is trading “more than comfortably in the mid 0.93s,” he said.

The Aussie has climbed 5.2 percent this year, the best performance among 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar has dropped 0.4 percent, while the euro has slid 1.6 percent and the yen has gained 2.8 percent.

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