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IMM currency futures pit trading lower

CHICAGO: Most IMM currency futures finished with steep losses and close to session lows on Tuesday.

June marks and yen both slumped to new contract lows on a combination of technical sales and sentiment that fundamentals point to firmer U.S. interest rates but lower German rates.

Futures edged down further late to day's nadirs as traders noted signs that funds were selling in anticipation of further currency losses vis-a-vis the U.S. dollar.

"It looked like some of the funds were getting short late," said a floor broker. "With volatilities being squashed the last few days, this thing (dollar) might take a run up."

Bundesbank president Hans Tietmeyer fueled perceptions that German rates could slip further. He told a German newspaper that there was no reason currently to raise German rates and that the central bank would continue to see whether there was small scope for another easing.

Some traders also said the yen suffered from ongoing tensions on the Korean peninsula. South Korea's army chief ordered troops on Tuesday to apply "rules of war" if North Korean soldiers set foot across the border.

"The dollar is in fine shape," said a floor analyst. "You can use Korea as an excuse. You can have lots of excuses.

"The dollar basically is in good technical shape...and as long as there's no (U.S.) inflation, the dollar should stay in good shape," the analyst added.

U.S. March producer prices on Thursday are forecast rising 0.4 percent and gaining 0.2 percent in the core rate, and Friday's consumer price index is expected to show a 0.3 percent gain and rise 0.2 percent without food and energy.

March retail sales, which were delayed until Friday, are seen up 0.3 percent overall and up 0.4 percent without autos.

Traders ignored remarks by Minneapolis Federal Reserve president Gary Stern.

Stern said the United States has had relatively low inflation for some time and that the Fed remained committed to low inflation. He also said he was cautious about long-term prospects for the U.S. economy.

Traders said that technically the dollar may have entered a new, higher range against the mark and yen, and the floor analyst looked for the U.S. unit to rise into bands between about 110 and 112 yen and 1.48 to 1.53 marks.

June marks on Tuesday, however, found support near $0.6694 or about 1.50 spot, with additional support expected near $0.6675 or 1.5042, and again near $0.6625 or 1.5160 spot.

At the end of pit trading, June yen fell $0.000058 to $0.009322, marks dropped $0.0076 to $0.6705, Swiss francs slid $0.0107 to $0.8317, sterling dropped $0.0098 to $1.5196, Canadian dollar eased $0.0002 to $0.7367, the Australian dollar rose $0.0027 to $0.7839, and the Mexican peso rose $0.000975 to $0.124650.-Reuter