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IMM currency futures end mixed, euro higher

CHICAGO: IMM currency futures ended mixed on Tuesday as stronger-than-expected US productivity tempered overnight gains in March euro and Swiss francs contracts.

Most currency contracts set pit highs early and trimmed gains after US nonfarm productivity rose 5.0 percent in the fourth quarter and unit labour costs fell 1.0 percent, beating forecasts and sparking a bounce in US stocks and bonds.

March euro, Swiss francs and sterling ended higher. March yen, Canadian dollars and Australian dollars settled lower.

US stock gyrations contributed to intraday swings and afternoon trade was spotty, traders said.

"We are tick for tick with stocks," one trader said. "If stocks go down one tick, the euro goes up one."

The March euro bounced to $0.9936 overnight in a delayed response to a drop in German unemployment and a shifting of cross pressure to the yen from the euro, traders said.

Traders said the perception has changed somewhat from the euro getting hit on the crosses to the yen and attributed euro gains more to external issues than euro zone economic news.

The March euro sank to $0.9869 in midmorning, rebounded to $0.9909 before midday and then sagged late. Resistance is seen near $0.9973 and $0.9998, traders said. A euro/yen move to 109.80 might be needed to test parity, an analyst said.

March yen ended lower as the market continued to digest expectations that Japanese gross domestic product for the October to December quarter will show declines, the technical definition of a recession.

The contract set a five-month low at $0.009163, but found little followthrough and trimmed losses, traders said.

Some cross action was evident with buying of sterling for yen, traders said. March yen's decline to a daily low appeared to ease pressure on euro and Swiss franc contracts, though that was not necessarily a direct correlation, they added.

Dollar/yen was seen moving toward 110 spot, roughly $0.009136 in March yen. The 111.06 area is a target farther out, about $0.009047 in March yen.

March sterling ended sharply higher on relatively light volume with the main focus on the Bank of England's Monetary Policy Committee two-day meeting that starts on Wednesday. A 25 basis point rate hike is widely expected.

March sterling tested intraday support near $1.6000 early, then surged to $1.6140 before midmorning. The contract trimmed some of the steep gains, but settled above $1.6100.

At settlement, March yen was $0.000049 lower at $0.009194, euros were up $0.00550 at $0.98810, Swiss francs up $0.0031 at $0.6155, sterling up $0.0146 at $1.6106, Canadian dollars off $0.0004 at $0.6920, Australian dollars off $0.0010 at $0.6334 and Mexican pesos up $0.000250 at $0.105225.-Reuters