Treasury - Daily Forex for day 29.10.2006

The dollar continued to fall against the euro yesterday, still affected by Federal Reserve's somewhat bearish post-meeting statement from Wednesday. U.S. durable goods orders rose less than forecast in September when stripping out the volatile transport orders component, giving investors another reason to sell the dollar. On the other hand, September home sales grew by more than expected.

As expected, the CNB held interest rates unchanged on Thursday, with five policymakers voting to keep the benchmark two-week repo rate steady at 2.50%, while only one advocating a 25 basis point hike. But CNB Governor Tuma sounded rather hawkish in the press conference, confirming the market's view that the bank would continue raising interest rates in the months ahead. The CNB simultaneously published its new quarterly macroeconomic prognosis, that raised the midpoint of inflation prediction to 4.2% for 18 months ahead from previous 4%, and cut the midpoint of 2006 economic growth prediction to 6.2% from previous 6.6%. The crown's reaction to the rate decision, new predictions and Tuma's comments was negligible.