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IMM currency futures end mostly higher, yen jumps

CHICAGO: IMM currency futures ended mostly higher, with yen futures rallying sharply and garnering support from both technical and fundamental factors.

The rally in March yen started overnight, with the contract lifted a 31-month-high close in the Tokyo Nikkei stock average.

A Reuters survey of 11 Japan-based financial institutions showed that Japanese investors were shifting funds away from U.S. stocks into Japanese shares as concerns mounted that higher interest rates could fuel a slide in U.S. equities.

Increased interest in Japanese stocks offered solid support to March yen, with one IMM currency futures trader saying investors needed "more yen to take on the stock market."

Other supportive factors included Japanese businesses repatriating yen after liquidating overseas investments in the final month of the Japanese fiscal year, traders said.

March yen pierced resistance near $0.009395 on moderate volume but pared gains before the close. The contract closed below $0.009400, the area nearby yen needed to stay above to signal a push toward $0.009500, said Frank Lesh, futures analyst at Rand Financial Services.

Lesh said the March yen's rise was fuelled by buy stops hit above $0.009250, as well as short covering.

"I think a lot of people are looking at this rally as purely a short-covering move," the IMM trader said.

March euros also pushed higher, partly due to an oversold condition, said Lara Rhame, foreign exchange economist at Brown Brothers Harriman.

With the European Central Bank scheduled to meet on Thursday to decide whether to tighten credit, market participants were slightly skittish, in spite of expectations the ECB will leave rates alone, Rhame said.

"The ECB is a very unknown animal," she said.

The Australian dollar was the only IMM currency contract to close lower. Nearby Australian dollars set a new contract low at $0.6030. The contract came under pressure from buying of yen and Canadian dollar against the Australian dollar, traders said.

At settlement, March yen was up $0.000256 at $0.009356, euros up $0.00790 at $0.97510, Swiss francs up $0.0044 at $0.6071, sterling up $0.0070 at $1.5864, Canadian dollars up $0.0011 at $0.6907, Australian dollars off $0.0145 at $0.6044 and Mexican pesos up $0.000225 at $0.106500. -Reuters