Futures Markets: Currency Contracts Rise on Anticipation Of Lower U.S. Rates
Foreign currency futures prices rose strongly on anticipation of lower U.S. interest rates, with the Swiss franc and Japanese yen setting life-of-contract highs.</br></br>Traders expect the recent collapse of crude oil prices to keep a lid on inflation for the foreseeable future, holding down U.S. interest rates, analysts said.</br></br>Also, "Everyone wants to diversify out of dollars in case deflation weakens the U.S. economy," said Jon Pedersen, director of futures trading for Swink & Co., Little Rock, Ark.</br></br>Commodity prices in general have weakened in recent weeks, setting eight-year lows. Also, the Gramm-Rudman deficit reduction act, although mired in litigation, still is perceived as deflationary, analysts said. "These things added together have made the dollar weaker," said Mr. Pedersen. "It seems there's a big shift out of dollars in international capital flow."</br></br>The Swiss franc, traditionally seen as a haven among currencies, was strongest as many traders bought franc futures and sold contracts tied to West German marks. Unlike Swiss banks, West German institutions have made big loans to oil-producing nations and could be hurt by oil-related loan defaults.