08.06.201306:55:08UTC+00Dollar powered up as U.S. jobs data back fed taper speculation

The dollar rallied versus the euro after a report showed U.S. employment progress was greater than forecast last month, sustaining speculation the Federal Reserve is moving toward reducing its financial-stimulus program.

Futures Positions

Futures traders decreased their wagers that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on an increase -- so-called net shorts -- was 82,744 on June 4, compared with net shorts of 99,769 a week earlier.

Futures traders added to bets the pound will decline against its U.S. peer, giving them their most bearish position in data starting in 1992. Net shorts on sterling versus the greenback totaled 77,738 on June 4, versus 74,525 a week earlier.

JPMorgan Chase & Co.’s G-7 Volatility Index, based on currency option premiums, reached 10.62 percent, the highest level since June 2012.

Electronic foreign-exchange options, Canadian dollar, yen and open-interest in Australia’s currency climbed to a record yesterday at CME Group Inc., the world’s largest futures exchange. Overall volume of foreign-exchange futures and options yesterday was 1.9 million contracts with a notional value of $238.9 billion, the company said today in a statement. It was largest of the year in notional value and the fourth largest day ever, CME Group said.

Options Trade

Trading in over-the-counter foreign-exchange options totaled $37.9 billion, compared with $42 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp.. Volume in options on the dollar-yen exchange rate was $14.1 billion, the largest share of trades at 37 percent. Dollar-Chinese yuan options were the second most-actively traded, at $4.6 billion, or 12 percent.

Aussie Drops

Australia’s dollar dropped versus the yen, set for its worst weekly rout since 2011, before Chinese data tomorrow forecast to show growth in imports slowed, dimming the demand outlook for commodities.

Jobs Report

The U.S. employment data may be “mildly” positive for the dollar as it keeps alive speculation that the Fed will reduce asset purchases and signals the economy continues to grow while withstanding reductions in government spending, said Alan Ruskin, the New York-based global head of Group of 10 foreign-exchange strategy at Deutsche Bank AG.

Fed Watch

“Expectations of tapering is a positive for the U.S. dollar as it means a slowing in the expansion of the Fed’s balance sheet,” Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York, said by e-mail. “The May non farm payroll number was better than expected and the increase in the unemployment rate also coincides with an increase in labor-force participation.”

Abe Policy

“The comments from Abe weren’t satisfactory for the market,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “That’s reinforcing the move higher in the yen. All markets have been heavily short the yen and so people have been caught wrong-footed which is forcing heavy buying. As long as the stock market remains under pressure the yen can remain firm.” A short position is a bet an asset will decline.

The yen has added 2.7 percent in the past month, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 2.2 percent and the dollar climbed 1 percent.