Please read the following IRS reference regarding the definition of a Section 988 transaction. Section 988 transactions include debt instruments, payables, receivables, forward contracts, futures contracts, options or similar instruments denominated in any nonfunctional currency asset.
CD's or other assets are not specifically mentioned in this publication so I would err on the side of caution in trying to declare this as an ordinary loss. i suppose you can make a case for yourself as Mike9241 mentions if the loss was due to currency devaluation but if it was due to declining interest rates, then this would not be a 988 loss.
Use your best discretion. Interest and Dividend losses are not allowable for US tax purposes and should not be allowable for foreign as well. This is the position that I take although others may take a contrary view.
@rset
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