Treasury - Daily Forex for day 01.03.2006

The dollar tumbled broadly on Tuesday, undermined by a slate of soft U.S. economic data. Firstly, Purchasing Managers' Index for Chicago area showed the business activity in the region fell to 54.9 in February from 58.5 in January, lagging behind expectations for a flat reading. Further, the U.S. consumer sentiment as measured by the Conference Board unexpectedly slumped to 101.7 in February from a revised 106.8 in the previous month. Moreover, broad expectations that the European Central Bank will hike interest rates by 25 bps to 2.5% on Thursday also supported the euro versus the dollar. By contrast, markets ignored the Commerce Department' report that the U.S. GDP rose by 1.6% in Q4, as expected, up from an original estimate for a 1.1% reading.

The Czech currency firmed against the euro yesterday after Prime Minister Jiri Paroubek said exporters should be able to cope with an annual appreciation of the crown by 2.5-3.0%. The comment lifted the crown as high as 28.260 to the euro before slipping back to 28.300 later in the session.