Treasury - Daily Forex for day 09.07.2005

The dollar climbed above the psychologically important level of $1.20 per euro last Friday, helped by optimistic U.S. manufacturing data. The Institute of Supply Management's index of national manufacturing activity jumped to 53.8 in June from 51.4 in May, exceeding market forecasts for a 51.5 reading. The report reinforced market expectations for further monetary policy tightening after the Federal Reserve raised interest rates by 25 basis points to 3.25% at its June 30 meeting, the ninth straight rate rise. On the other hand, both the European Central Bank and the Bank of England left interest rates unchanged at 2% and 4.75% respectively yesterday. A series of blasts in London had only short-term impact on the trading.

Tracking other central European currencies, the crown was weakening in the past few days. It fell as low as 30.290 to the euro, a one-month low, from around the 30.0 level a week ago. Even upbeat foreign trade data for May, showing the best ever result for this month, did little to improve the market sentiment. As expected, the CNB held interest rates flat at a record low of 1.75%, citing balanced inflation risks and the steady economic development.