Treasury - Daily Forex for day 17.05.2007

The dollar firmed to 3-month highs against the yen and posted its biggest daily rise versus the euro in more than two months on Wednesday after reports showing stronger-than-expected growth in U.S. housing starts and industrial output in April. The housing starts surprisingly rose 2.5% from March, while the industrial production jumped 0.7% mom in April after a revised 0.3% drop in the previous month. Analysts had forecast just 0.3% rise in the production last month.

The crown surged against the euro on Wednesday on mounting speculation that the Czech central bank will deliver interest rate hike as early as May 31. Supporting this view, CNB Vice-Governor Miroslav Singer and board member Vladimir Tomsik said in a local newspaper article published today that policy tightening is approaching. The crown's rise could also be attributed to the effect of unwinding carry trades since the other central European currencies lost ground yesterday.