Treasury - Daily Forex for day 21.07.2006

Federal Reserve Chairman Ben Bernanke disappointed the dollar-bulls by being less hawkish than expected, knocking the dollar sharply lower against the major currencies. Speaking before the Senate Banking Committee, Bernanke said that the central bank expects core inflation to drop in the coming quarters due to the slowing economy. That cooled expectations that the Fed will lift interest rates again next month. Earlier, the dollar rose to a three-month high of $1.2456 per euro after data showed U.S. core consumer price index grew by 0.3% in June, faster than analysts had forecast (0.2%).

The crown rebounded from a session low on Wednesday after central bank board member Michaela Erbenova said that interest rates might be raised soon. This underpinned market expectations that the CNB will lift rates as soon as next week.