Treasury - Daily Forex for day 01.05.2007

The dollar firmed broadly on Thursday while the yen hit a new record low versus the euro ahead of a Bank of Japan policy meeting. The dollar rally, however, was expected to be short-lived as Friday's U.S. GDP data could trigger a fresh sell-off. The advance reading on the first-quarter GDP growth is forecast at 1.8% on an annualized basis, down from 2.5% in the previous quarter.

The Czech crown rebounded from six-week lows against the euro yesterday, helped in part by signals from the CNB that it might soon tighten the interest rates. At its monthly policy meeting held on Thursday, the bank left interest rates steady, as expected, but revealed that most of policymakers saw a hike as a next policy step. Four out of six board members present at the meeting voted to keep the two-week repo flat at 2.50%, while the two advocated a 25 bps rise. Simultaneously, the CNB raised its inflation forecast to 3.2-4.2% for December 2007 and predicted 2.7-4.1% yoy CPI growth at the end of 2008. The bank also raised its GDP growth forecasts to 4.9-6.5% from previous 4.4-6.2% in 2007, and to 3.8-6.8% from 3.1-6.5% for 2008.