Futures Markets: Foreign Currencies Fall as Traders Take Profit on Dollar Decline
Foreign-currency futures plunged as traders took profits on last week's steep decline in the dollar.</br></br>The anticipation of higher U.S. interest rates encouraged selling in foreign currencies. Yesterday the Federal Reserve Board released a report indicating that it plans to keep a tight rein on credit this year. Rising interest rates tend to strengthen the dollar.</br></br>The same news pushed interest-rate futures sharply lower. The strengthening dollar depressed precious metals futures and sent prices for grains and soybeans lower, in anticipation that a strong dollar would continue to hamper farm exports.</br></br>Political unrest in Lebanon, where the resignation of the Lebanese cabinet Sunday seemed to threaten the government of Lebanese President Amin Gemayel, also encouraged a retreat from foreign currencies to the dollar as a safe-haven investment, an analyst said.</br></br>Many traders still think the dollar is overvalued. But it may not be clear for several days whether last week's plunge in the dollar was a signal of a continuing dollar decline, or merely a technical correction, analysts said.