Treasury - Daily Forex for day 16.02.2006

The dollar firmed against the euro on Wednesday, supported by comments from Federal Reserve Chairman Ben Bernanke and declining oil prices. In his first congressional testimony before the U.S. House Financial Services Committee, Bernanke said the U.S. economy was running near capacity but warned of high inflation. This confirmed the market expectations that the Fed would continue to hike interest rates to 5% by mid year from current 4.5%. The dollar briefly dipped after U.S. Treasury report showed net capital inflows for December amounted to much lower-than-expected $56.6 billion, not enough to finance the month's trade deficit of $65.7 billion. The market had expected net inflows of $82.3 billion after November's upwardly revised $91.6 billion.

The crown soared as high as 28.350 to the euro on Wednesday following comments from Prime Minister Jiri Paroubek that the Czech Republic will likely swap its crown for the euro in 2010 at levels nearing 25 per euro. The remark discomforted the central bank which verbally intervened several times against the crown's rise in recent days.