The economic cycle generally consists of four stages: recovery, prosperity, recession and depression. For speculative futures traders, margin interest is the main cost of their trading. Therefore, the fluctuation of interest rate will directly affect the transaction cost of futures traders. If interest rates rise, transaction costs rise and speculators' risks increase, futures speculation will be reduced and trading volume will be reduced. If the interest rate is lowered, the cost of futures speculation will be reduced and the trading volume will be enlarged.
Interest rate adjustment is a macro-control means for the government to tighten or expand the economy. The change of interest rate has great influence on financial derivatives trading, but little influence on commodity futures. For example, since 1994, in order to curb inflation, the People's Bank of China has substantially raised interest rates and increased the subsidy rate for maintaining the value of medium and long-term deposits and government bonds, which has led to the soaring price of government bond futures. On May 1995, the State Council ordered the trading of treasury bonds futures to be suspended. The futures market is an open market, and futures prices are closely related to commodity prices in the international market. The comparison of commodity prices in the international market inevitably involves the exchange rate of currencies in various countries, that is, the ratio of domestic currency to foreign currency. When the local currency depreciates, even if the price of foreign goods remains unchanged, the price of foreign goods expressed in local currency will rise, and vice versa. Therefore, the fluctuation of exchange rate will inevitably affect the corresponding futures price changes.
According to estimates, the depreciation of the US dollar against the Japanese yen 10% will reduce the price of soybean imported by Tokyo Grain Exchange in Japan by about 10%. Similarly, if the RMB depreciates against the US dollar, the domestic soybean futures price will also rise. The monetary policies of major exporting countries, such as the sharp depreciation of the Brazilian real in 1998, have greatly enhanced the export competitiveness of Brazilian soybeans. Relatively speaking, the increase in soybean supply has a negative impact on Chicago soybean futures prices. The monetary policies of major importing countries such as South Korea and ASEAN countries depreciated sharply in 1997, and the demand for soybeans and soybean meal shrank sharply, which led to a decline in world soybean prices. This fully illustrates the impact of exchange rate changes on related futures prices. Therefore, futures traders must pay close attention to the exchange rate changes of the commodities they trade.