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IMM currencies end lower, euro off sharply

CHICAGO: Most IMM currency futures ended lower on Thursday as the March euro eroded on active fund selling in the morning and the March yen gave back some of the steep gains it achieved on Wednesday.

The European Central Bank held rates steady, as expected, and ECB President Wim Duisenberg said the central bank was not active in the forex markets on Monday when the euro plunged to a lifetime low versus the dollar and then rebounded sharply.

Duisenberg also said the balance of risks remains to the upside and there is little doubt about the future direction of the central bank's monetary policy.

The March euro popped up to test intraday resistance at $0.9750 near the open and then eroded. Selling perked up as the contract broke the opening pit range from $0.9725 to $0.9727 and then accelerated on the fall below $0.9700, traders said.

Ken Boyer, senior currency strategist at Standard & Poor's MMS, said the March euro contract remained relatively close to Wednesday's range, but the fall to the $0.9620 day low brought levels reached in Monday's steep selloff back into play.

Traders noted that market attempts to buy the euro early in the session have been thwarted continually.

"People keep thinking that (the euro) has gone too far to the downside and try to buy it back, but then they get stopped out and that adds fuel to the downside," Boyer said.

The March euro has minor support at $0.9572 and $0.9540. Major support is seen at the $0.9440 contract low set Monday.

Traders said despite the losses, March yen may continue to be propped by fiscal year-end fund repatriation and Tokyo stock strength reflected by the Nikkei 225 index holding 20,000. The fund repatriation could continue to mid-March, they said.

The March yen break below $0.009300 may have triggered a small double top pattern formed the last two days that would suggest a steeper pullback to $0.009220, Boyer said.

"That (March yen) has not sold off more sharply seems to suggest that the downside move is corrective," Boyer said, adding that the price action for the last week and a half appears to back a further strengthening in March yen.

Analysts said expectations of finding knockout options in the cash market would likely cap March yen gains near $0.009399 to $0.009410 near term.

Other contracts were less active. March sterling set a daily low at $1.5758, near the multimonth low of $1.5750 set on Wednesday. March Swiss francs sank two ticks below support to $0.5988 as the March euro set its daily low

March Australian dollars set a contract low at $0.6028 overnight, then probed near the $0.6115 overnight peak early. The contract eased from the peak and settled in the middle of a relatively broad daily range.

At settlement, March yen was off $0.000056 at $0.009300, euros off $0.00810 at $0.96700, Swiss francs off $0.0049 at $0.6022, sterling off $0.0094 at $1.5770, Canadian dollars off $0.0040 at $0.6867, Australian dollars up $0.0031 at $0.6075 and Mexican pesos up $0.000500 at $0.107000. -Reuters