Dollar Hedging Costs Hit 1-Week High Ahead of Payrolls as Fed Guidance Shift Fuels Volatility
Updated
Updated · Yahoo Finance · Aug 6
Dollar Hedging Costs Hit 1-Week High Ahead of Payrolls as Fed Guidance Shift Fuels Volatility
3 articles · Updated · Yahoo Finance · Aug 6
Summary
One-day options on the Bloomberg Dollar Spot Index climbed to their highest since July 30 as traders rushed to protect against swings before Friday’s US payrolls report.
Kevin Warsh’s retreat from forward guidance has made each data release more market-moving, leaving Wall Street less certain about the Fed’s rate path and reaction function.
One-week dollar volatility also rose, capturing both payrolls and next week’s inflation report, after traders had priced roughly a 30% chance of a rate hike just before last week’s Fed meeting.
The dollar faces added downside risk against the yen because fresh support measures remain possible after recent joint US-Japan intervention triggered its worst four-day slide versus the yen in about two years.
Economists expect July unemployment to hold at 4.2% and payroll growth to top 80,000, a result that could test how quickly the Fed responds to any labor-market weakening.