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Most IMM currencies end lower, yen off sharply

CHICAGO: IMM currency futures ended an active session mostly lower as Bank of Japan intervention to slow the yen's rise overnight weighed on that contract throughout the session.

Steep losses in US equities supported March euro and Swiss francs, which followed through on sharp gains on Monday. The contracts lacked momentum to pierce resistance near $1.04 and $0.6500 respectively, and ended moderately higher.

US stock declines pressured March Mexican pesos sharply, and March Canadian dollars tested support near $0.6891.

March yen faded sharply overnight after the Bank of Japan intervention, which Japanese Vice Finance Minister Haruhiko Kuroda confirmed.

March yen tested support near $0.009800 several times, then broke that support late and ended near the $0.009786 day's low.

"The Bank of Japan came back into the market and has been a key support for dollar/yen," said Allison Montgomery, currency economist for IDEAglobal.com.

Montgomery said many central banks, including the US Federal Reserve, have started to remove the extra liquidity provided to alleviate concerns about the rollover to year 2000, but the Bank of Japan has not done so at this point.

"So, from a liquidity perspective, that is adding some (dollar) support," Montgomery said.

The market will focus next on how the Nikkei 225 index responds to Tuesday's US stock weakness, Montgomery said. On Tuesday, the Nikkei settled above 19,000 for the first time since August 1997, lifted by high technology stocks.

Sources said Tuesday that German unemployment fell in December by 68,000 from the previous month on a seasonally adjusted basis. That data is scheduled for release Wednesday.

The unemployment data is much stronger than expected and, if confirmed, should support the euro, Montgomery said.

March euro has a target from near $1.04 to about $1.0460 in the near term. Piercing the top end of that range would open a medium-term target of $1.0510, traders said.

The contract reached $1.0395, the highest level since November 22, then faded to as low as $1.0322 in pit trade before firming again late. Volume was well below Monday's session, but the price action was constructive, one trader said.

One analyst said euro/dollar pierced the 38.2 percent retracement of the downmove from mid-October to early December and said the currency has opened up a medium-term target of a 50 percent retracement of the downleg, near $1.0451.

Currency futures took little direction from President Bill Clinton's decision to nominate Federal Reserve Chairman Alan Greenspan to lead the central bank for a fourth term.

At settlement, March yen was $0.000173 lower at $0.009791, euros up $0.00230 at $1.03520, Swiss francs up $0.0015 at $0.6471, sterling off $0.0022 at $1.6372, Canadian dollars off $0.0032 at $0.6899, Australian dollars off $0.0060 at $0.6561 and Mexican pesos off $0.001700 at $0.102175. Jan 4 - Most IMM currency futures ended lower in moderate to active trade. March yen broke support near $0.009803 late and settled near the fresh low. Bank of Japan intervened to slow yen rise overnight, adding weight despite huge US equity losses. Support is near $0.009772. March euro ended higher, off the day high. Sources said December German unemployment fell sharply. Support is seen near $1.03 and resistance at $1.0395. US stock selloff weighed on March Mexican peso.-Reuters