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IMM currencies end mixed, await Fed rate decision

CHICAGO: IMM currency futures ended mixed on Tuesday as a market focus on central bank rate deliberations suppressed volume in the afternoon, traders said.

March euros and Swiss francs bounced sharply higher for a brief period early and settled higher on consolidation after recent losses, traders said.

March yen lacked momentum to mount a significant rebound and ended lower in range trade. March yen was most active of the IMM contracts with volume slightly higher than the euro.

The Federal Open Market Committee opened a two-day meeting on Tuesday. Economists polled by Reuters were unanimous last week in expecting the Fed to announce a 25-basis-point rate hike on Wednesday afternoon when the meeting ends.

The Reserve Bank of Australia met Tuesday, and economists polled by Reuters expect a tightening but differed on the size. The RBA may act as early as its money market operations window Wednesday morning.

The European Central Bank meets on Thursday.

The March euro bounced to $0.98080 before midmorning as the dollar briefly dipped after strong US National Association of Purchasing Management data, traders said. March Swiss francs bounced to $0.6105 at the same time.

Traders attributed the rally to likely short-covering and said March euro should remain weak intermediate-term. March euro backed off quickly and ebbed near the $0.9718 pit low.

"The euro still feels weak," one trader said.

March euro set a contract low at $0.9698 on Monday and has a target of $0.9685 near-term, traders said.

US economic data is expected to stay strong and the Federal Reserve is seen to be in a tightening cycle, both dollar supportive, traders said.

Japan's unemployment rate rose in December, the first rise in six months, and Fitch IBCA said it would be concerned about Japan's credit outlook if large fiscal deficits were to persist for much longer, weighing on yen overnight, traders said.

March yen failed to test the $0.009394 overnight high and ended lower. Dollar/yen may range from 107 to 108 near-term, roughly $0.009407 to $0.009320 in March yen, traders said.

Other contracts were less active.

March Canadian dollars bounced near the $0.6929 overnight high on decent-sized fund buying near midmorning and then tested the $0.6927 pit high again near midday.

At settlement, March euros were up $0.00360 at $0.97610, yen off $0.000033 at $0.009335, Swiss francs up $0.0015 at $0.6071, sterling off $0.0006 at $1.6150, Canadian dollars up $0.0004 at $0.6918, Australian dollars off $0.0035 at $0.6317 and Mexican pesos up $0.000100 at $0.102675.-Reuters