Treasury - Daily Forex for day 28.10.2005

The U.S. dollar regained ground against the euro on Wednesday helped by a surge in U.S. Treasury yields, which raised the attractiveness of dollar-denominated assets. The yields have risen about 20 basis points so far this week on uncertainty about U.S. monetary policy after new Fed Chairman Ben Bernanke will take the office. The market now expects two more rate hikes by the end of this year followed by at least additional one in 2006.

The Czech currency approached a 3-month low against the euro yesterday, pulled down by the weakening zloty after coalition talks between two Polish centre-right parties stumbled, raising prospect of a weak minority government unable to push through long-awaited reforms. There is also a nervousness at the Czech market ahead of today's CNB policy meeting, with some speculating about a possible rate hike.