COMMODITIES : Currency Futures Slip; Grains, Oil Climb
Foreign currency futures slipped sharply on the Chicago Mercantile Exchange on Thursday as the markets reacted to foreign trade data showing a smaller deficit than expected for January.
On other markets, crude oil, grains and soybeans advanced. Precious metals declined.
“The trade figures had a very big impact on foreign exchange, as well as stocks and bonds,” said Gary Dorsch, senior money market analyst in Chicago with LNS Financial Group.
The Commerce Department said the deficit widened slightly in January to $12.4 billion, but this was below the expectations of $12.8 billion to $13 billion.
“Most importantly,” said Dorsch, “U.S. trade fell sharply with Japan and Western Europe, giving the dollar a very big boost versus the Japanese yen and the (West) German mark.”
The currency markets also were jarred by the Bank of England’s announcement that the nation’s base lending rate was being cut by half a percentage point, to 8.5%.
“The British pound has been the kingpin of the currencies in the last several days,” said Dorsch. “So when the Bank of England lowered the interest rate, foreign currency dealers sold off lower-yielding currencies, particularly the Swiss franc.”
He said that Swiss francs deposited in Swiss banks draw the lowest interest rate of all the major currencies.
At the Chicago Mercantile Exchange, the British pound dropped 140 to 155 points, with the contract for delivery in June settling at $1.8245; the German mark was down 73 points with June at 59.55 cents; and the Japanese yen was off 87 points with June at .7806 cent.
In response to the stronger dollar, precious metals futures declined.
At the Commodity Exchange in New York, gold was $1.30 to $2.20 lower, with the April contract at $444.90 an ounce; silver was 2.2 cents to 3 cents lower, with May at $6.36 an ounce.
Energy futures at the New York Mercantile Exchange advanced on the announcement that OPEC plans new measures to stabilize oil prices.
Rilwanu Lukman, president of the cartel, said he will announce next Tuesday what steps will be taken.
Oil prices spurted upward by about 30 cents a barrel in the closing minutes of trading after the OPEC announcement, said Peter Beutel, an analyst in New York with Elders Futures Inc.
West Texas Intermediate crude oil settled 10 cents to 28 cents higher, with the April contract at $16.28 a barrel; heating oil was .11 cent to .14 cent higher, with April at 44.22 cents a gallon; and unleaded gasoline was .36 cent to .50 cent higher, with April at 45.60 cents a gallon.
Stock Index Futures Up
Grain and soybean futures prices posted strong gains on the Chicago Board of Trade.
Soybeans were up more than 14 cents a bushel and wheat gained as much as a nickel.
A large speculator bought sizable amounts of beans and soybean products to offset earlier sales, said Dale Gustafson, an analyst with Drexel Burnham Lambert Inc.
“That ignited it,” he said. “It prompted a lot of short covering by commission houses.”
Wheat was 3.5 cents to 5 cents higher with March at $2.975 a bushel; corn was 1.5 cents to 2 cents higher, with March at $1.99 a bushel; oats were 2.75 cents to 4.5 cents higher, with March at $1.94 a bushel; and soybeans were 14.5 cents to 16.25 cents higher, with March at $6.26 a bushel.
Cattle futures declined while pork moved higher on the Chicago Mercantile Exchange.
“Cattle were lower despite some storms moving into the plains states,” said Charlie Richardson, an analyst in Denver with Lind-Waldock & Co. “There was a lot of profit taking ahead of the cattle on feed report,” which comes out today.
“At the same time,” he said, “Boxed beef prices were lower again last night, casting some skepticism on the overall health of the market.”
Live cattle settled unchanged to .32 cent lower, with the April contract at 73.65 cents a pound; feeder cattle were .05 cent to .62 cent lower, with March at 81.82 cents a pound; live hogs were .5 cent to 1.03 cents higher, with April at 45.80 cents a pound; and frozen pork bellies were .45 cent to 1.85 cents higher, with March at 54.15 cents a pound.
Stock index futures were higher on the Chicago Mercantile Exchange, with the March contract of the Standard & Poor’s 500 index settled at 270.65, up 1.85 points. The underlying spot index closed up 2.56 at 271.21 points.
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