20000204

IMM currency futures end mixed after Fed rate hike

CHICAGO: IMM currency futures ended mixed as a widely anticipated Federal Reserve rate hike buffeted contracts briefly on Wednesday afternoon, traders said.

The Federal Reserve raised the fed funds and discount rates by 25 basis points to 5.75 percent and 5.25 percent respectively and put markets on notice for more increases, saying it was worried that excess demand growth could foster inflationary imbalances.

March yen trimmed losses but ended lower. March euro and Swiss francs whipped to daily highs, then trimmed gains late.

Contracts from commodity-based currencies in Canada, Australia and Mexico were buoyed by the hike and ended higher, analysts noted. March sterling surged to a pit high but still ended sharply lower on the day.

"We didn't get any new information here. Everyone anticipated this," said Andy Busch, foreign exchange director at Bank of Montreal. "There was some volatility after the hike. Then the market went back to what it was doing before."

Busch said the size of the hike showed the Fed was patient and would probably hike rates another 50 basis points. There should be another 25 basis point hike at the March meeting, and then the Fed will see how things progress after that.

The Reserve Bank of Australia on Wednesday tightened 50 basis points, more than expected. March Australian dollars ended higher and were expected to remain supported by the positive change in rate differentials, traders said.

The Bank of Canada is expected to match the Fed rate hike on Thursday, and the Bank of England is seen hiking rates at its Monetary Policy Committee meeting next week, analysts said.

Analysts differed on whether the European Central Bank would hike rates Thursday but said they expected a tightening in the near term.

March yen ranged from $0.009267 to $0.009312 in pit trade after setting a multimonth low at $0.009230 overnight. March euros and Swiss francs set day's highs at $0.98280 and $0.6112 late. March euro has resistance near $0.98600.

March Canadian dollars punched to a daily high at $0.6962 and ended near peaks, propped by moderate fund buying.

At settlement, March yen was off $0.000036 at $0.009299, euros up $0.00230 at $0.97840, Swiss francs up $0.0010 at $0.6081, sterling off $0.0080 at $1.6070, Canadian dollars up $0.0041 at $0.6959, Australian dollars up $0.0064 at $0.6381 and Mexican pesos up $0.000425 at $0.103100.-Reuters