Market Rumours

Dollar/yen currency options could edge down early next week if a key U.S. employment report shows that fewer jobs were lost in November, prompting players to further trim their dollar downside hedges. The U.S. non-farm payrolls report for November, due at 1330 GMT, is expected to show that employers shed 125,000 jobs in the month, less severe than the 190,000 lost in October.Benchmark one-month at-the-money dollar-yen volatilities were at 11.90%/12.60% in Tokyo Friday, unchanged from Thursday in New York. But dealers said that options players next week may look to sell dollar-put contracts, tools to hedge against falls in the currency, if the payroll report does not bring any negative surprises. "I think downward pressure on options is the most likely scenario, as the employment data could surprise to the upside," buoying the dollar against the yen in the spot market, said an options dealer at a major Japanese bank. More players were of that view, the dealer said, after data overnight showed U.S. weekly jobless claims fell to their lowest level since September 2008 in the week ended November 28.Reflecting speculation the greenback could gain into next week, one player bought a one-week dollar-call contract with a strike price of Y89.00 and implied volatility of 14.00%, the options dealer said. The player would profit if the U.S. currency is trading above Y89.00 at the time of the option's expiry.

USD/JPY, EUR/JPY rise after Japan Deputy Prime Minister Kan says: "It would be good if the yen weakened a bit more"; but remark unlikely to push USD, EUR much higher vs JPY as "the market already understands that the Japanese government has been trying to talk down the yen recently," so impact of such verbal intervention now more limited, says Hideki Amikura, deputy general manager of Nomura Trust and Banking. USD/JPY likely capped at 89.00 vs last 88.32; EUR/JPY last 132.98, resistance at 133.50.

JPY crosses, EUR/USD could be weighed in weeks ahead by fears of other sovereign debt crises, after U.K. Guardian reports Dubai World creditors likely to reject company's proposed standstill agreement, says Hideki Amikura, deputy general manager of Nomura Trust and Banking; despite view that comparatively contained scope of global exposure to Dubai debt issue may limit effect of report on risk-assets, "the risk from our perspective in the foreign exchange market is that there could be similar sovereign debt problems lurking elsewhere" that could, if they emerge, drag down higher-yielding, riskier units such as EUR. But says for now, EUR likely firm after ECB Thursday said it will start curbing stimulus, a precursor to any future rate hikes. While some players had speculated bank was to signal more hawkish stance, says "this was clearly a gesture toward an eventual exit" of extraordinary easing measures.

Is some risk aversion about with yen crosses tepid and GBP underperforming with report in UK Guardian that creditors of Dubai World are expected to reject a standstill agreement proposed by the company, threatening to drag out negotiations over conglomerate's debt, says RBC Capital Markets' Sue Trinh; "if the standstill isn't upon agreed by December 14, when a $3.5 billion sukuk bond by Dubai World's Nahkeel is due, Dubai World will technically be in default and bondholders will be able to enforce their security. In turn, negotiations over $26 billion worth of the conglomerate's $59 billion debt risks to be dragged out for months," Trinh notes. USD/JPY at 88.32 after early slip to 88.00, with EUR/USD down at 1.5055 and GBP/USD at 1.6539