Treasury - Daily Forex for day 10.06.2006

The U.S. dollar continued to rise steeply against the euro yesterday, hitting a one-month high after the European Central Bank opted for just a 25 basis point hike in its key interest rates. Some had expected a half percentage point hike. Putting an extra pressure on the euro, ECB President Jean-Claude Trichet failed to support expectations that the bank would continue to raise rates more aggressively. Going forward, it will be interesting to see whether the dollar is able to keep the gains after U.S. foreign trade data due out this afternoon. The trade deficit is expected to have widened to $65.0 billion in April from March's $62.0 billion.

The Czech crown slipped against the euro on Thursday after the European Central Bank raised interest rates, widening the gap to a record 75 basis points versus the lower Czech rates. Plunging Prague bourse had also negative impact on the crown, with the bourse's main index - PX falling 4% on the day. This morning the statistical office reported that the domestic economy, as measured by gross domestic product, grew by 7.4% in Q1, quickening from 6.9% in the prior quarter. The result was just below market expectations for a 7.5% expansion.