Treasury - Daily Forex for day 01.02.2006

The dollar erased a part of its previous losses versus the euro on Tuesday after the U.S. Federal Reserve raised its key funds rate by 25 basis points to 4.50%, as expected, and suggested that more monetary policy tightening may come. The Fed's statement said that "the expansion in economic activity remains solid" and that "some further policy firming may be needed", but economists agree that the decisions whether to hike or not at the next meeting in March will be increasingly dependent on incoming economic data. On the economic data front, U.S. consumer confidence index reported by the Conference Board jumped in January to its highest level in more than three years, further supporting the dollar. The index rose to 106.3 from 103.8 in December and above market forecasts for a reading of 104.5.

The Czech currency held almost flat against the euro yesterday, shrugging off remarks from Finance Minister Bohuslav Sobotka that the crown's strength did not correspond to domestic fundamentals.