The Chinese government continued its hawkish moves against inflation, trying to suppress the rising price of key goods by altering banking policy. The People's Bank of China raised its reserve ration – the amount of capital that banks must hold available – by 50 basis points.
The move will likely contract liquidity and slow some lending action, which strains commodity futures brokers and traders with extended long positions. However, without affecting the supply and demand fundamentals underlying commodity prices, it's not clear if such moves will definitively keep inflation at bay.
On the ICE Futures in New York, cocoa futures declined 1.68 percent to $2,848 per metric ton. Raw No. 11 sugar futures for March 2011 delivery slid 5.39 percent to 26.71 cents per pound.
No. 2 cotton futures for March 2011 lost 4.87 percent, falling 6 cents – the exchange-mandated limit – to 123.15 cents per pound. December "C" arabica coffee futures were volatile, dropping nearly 4 cents before recovering somewhat, down 0.38 percent at 210.5 cents per pound.
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