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    British Pound September 2010 (B6U10)

    1.5405+0.0053 (+0.35%) 7:11P EST (IMM) View Help
    Commodity Price Quote as of Tuesday, May 22nd, 2012

    Contract Specifications

    Symbol B6
    Name British Pound (6B)
    Exchange IMM
    Trading Months March, June, September, December (H, M, U, Z)
    Trading Unit BP62,500
    Tick Size 0.0001 (1 points) ($6.25 per contract)
    Daily Limit None
    Trading Hours 5:00p.m. - 4:00p.m. Sun-Thur CST
    Last Trading Day Second business day preceding third Wednesday of expiring month
    Value of one futures unit $62,500
    Value of one options unit $62,500

    CRB Yearbook Description

    A currency rate involves the price of the base currency (e.g., the dollar) quoted in terms of another currency (e.g., the yen), or in terms of a basket of currencies (e.g., the dollar index). The world's major currencies have traded in a floating-rate exchange rate regime ever since the Bretton-Woods international payments system broke down in 1971 when President Nixon broke the dollar's peg to gold. The two key factors affecting a currency's value are central bank monetary policy and the trade balance. An easy monetary policy (low interest rates) is bearish for a currency because the central bank is aggressively pumping new currency reserves into the marketplace and because foreign investors are not attracted to the low interest rate returns available in the country. By contrast, a tight monetary policy (high interest rates) is bullish for a currency because of the tight supply of new currency reserves and attractive interest rate returns for foreign investors.

    The other key factor driving currency values is the nation's current account balance. A current account surplus is bullish for a currency due to the net inflow of the currency, while a current account deficit is bearish for a currency due to the net outflow of the currency. Currency values are also affected by economic growth and investment opportunities in the country. A country with a strong economy and lucrative investment opportunities will typically have a strong currency because global companies and investors want to buy into that country's investment opportunities. Futures on major currencies and on cross-currency rates are traded primarily at the Chicago Mercantile Exchange.

    Dollar -The dollar index rallied in the second half of 2008 and early 2009 due to (1) the global financial crisis, which caused investors and financial institutions to flee into dollar liquidity, and (2) capital repatriation by U.S. investors who dumped riskier foreign investments during the financial crisis. However, the U.S. dollar index peaked at a 3-2/3 year high of 89.624 in March 2009 and then fell during the rest of 2009. The dollar fell after the global stock markets bottomed out in March 2009 and staged an impressive recovery rally, thus causing investors to slowly sell some of the emergency dollar liquidity that they acquired during the crisis.

    The dollar was also weak during 2009 due to extremely low U.S. interest rates with the Federal Reserve targeting the federal funds rate in the range of zero to 0.25%. Low interest rates discouraged capital from flowing into the U.S. In addition, large traders used the dollar for the carry trade, where they borrow cheap money in dollars and then sell those dollars in return for a higher-yielding investment in a foreign currency.

    After the weakness in the dollar index seen during the later part of 2009, the dollar index hit bottom in November 2009 and then rallied in early 2010. That rally was sparked by the faster economic recovery in the U.S. than in Europe and Japan and by the Greek debt problems, which undercut the euro. The dollar was also supported by the long-term improvement in the U.S. trade deficit excluding petroleum, which suggested that the dollar had become cheap enough to force a closer balance in trade aside from the immovable petroleum deficit.

    Euro - The euro, after falling sharply in the second half of 2008 due to the financial crisis, staged a sharp recovery during 2009 when financial institutions started lightening up on their emergency dollar liquidity. In addition, the euro is slowly gaining popularity among central banks as a currency in which to hold their foreign exchange reserves. The euro also saw strength in 2009 when the European Central Bank stopped cutting rates at 1.00% and kept its rates higher than the U.S., thus supporting the euro's interest rate differentials. In addition, the European Central Bank has already started drawing down its massive liquidity injections, whereas the Federal Reserve still has about $1.2 trillion in excess liquidity in the financial system. In early 2010, however, the euro fell sharply as Greece ran into serious budget troubles and had difficulty in selling its bonds, thus sparking talk that Greece, along with other high-deficit countries such as Spain and Portugal, might eventually be forced to stop using the euro and go back to using their original national currencies. However, the European Union came to the rescue to provide enough support to Greece to ease it through its budget difficulties and scotch talk of a euro breakup.

    Yen - The yen generally strengthened during 2009 as the dollar fell when financial institutions lightened up on their emergency dollar liquidity. The yen in late 2009 posted a 15-year high against the dollar. The yen also received support during 2009 as Japanese corporations and investors repatriated profits and assets back home. Some pressure came off the yen in 2009 when some large traders used the dollar for the carry trade rather than the yen. The yen's strength in 2009 came despite major bearish factors for the yen such as the weak economic recovery and that the Bank of Japan kept targeting the overnight rate near 0.10%, thus causing poor Japanese interest rate differentials.

    Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.
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