Currency vol gives Yellen housewarming gift

A gauge of major currency volatility fell to the lowest level in more than two weeks before Federal Reserve Chairman Janet Yellen gives her first monetary-policy report to Congress tomorrow as the central bank weighs the pace of the economy and additional cuts to its monthly bond-buying.

The yen rose versus most of its 16 major counterparts even as the Ministry of Finance said the nation’s current-account deficit widened to a record. Norway’s krone jumped the most in three weeks against the euro after inflation quickened. The Australian dollar fell as Toyota Motor Corp. said it will stop building cars there in 2017. Hungary’s forint and South Africa’s rand led losses among emerging-market currencies.

“Focus this week will be very much on Janet Yellen’s first round of congressional testimony as Fed Chairman,” Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, wrote in a client note. Yellen’s limited comments in recent months “suggest she favors the more gradual pace of tapering currently in place and can easily point to the recent softening in the jobs data and some other economic indicators to support her view.”

The JPMorgan G7 Volatility Index fell to 7.82 percent at 12:36 p.m. in New York, the lowest level on a closing basis since Jan. 22.

The yen gained 0.1 percent to 102.18 per dollar after sliding to 102.64, the weakest level since Jan. 31. Japan’s currency rose 0.1 percent to 139.41 per euro after dropping 1.6 percent during the previous two days. The euro added 0.1 percent to $1.3642.

Emerging Markets

An index of emerging-market currencies compiled by Bloomberg dropped 0.1 percent after rising 0.8 percent last week. The forint weakened 1.1 percent to 228.14 per dollar and the rand slid 0.7 percent to 11.1393.

Brazil’s real declined for the first time in five days as a drop in commodities reduced demand for the currencies of raw- material exporters. The currency depreciated 0.8 percent to 2.3989 per dollar.

Benchmark 10-year yields traded at almost the lowest level in three months as investors waited to see whether Yellen, who was sworn in as the central-bank head on Feb. 3, will acknowledge the recovery in the labor market is slowing. The Fed announced in December and January it would trim its bond purchases by $10 billion a month to $65 billion amid signs of economic growth.

U.S. employers added 113,000 workers last month, the Labor Department said on Feb. 7, a second month of gains that were less than the forecast projected by Bloomberg News surveys of economists.

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