Treasury - Daily Forex for day 07.09.2006

The U.S. currency firmed across the board yesterday after data showing a strong rise in labour costs and higher-than-expected growth in non-manufacturing sector supported hopes for yet another interest rate hike by the Fed. Unit labour costs, a potential source of inflation pressures, jumped 5% y-o-y in Q2, the highest advance since Q3 2000, while the Institute for Supply Management reported the service sector sentiment index soared to 57 in August from 54.8 in July. In late trading, however, the dollar erased much of its previous gains after somewhat negative reading of the Federal Reserve's Beige Book survey.

The Czech crown lost ground on Wednesday as investors were buying dollar and selling currencies of the emerging markets. It came under additional pressure after Standard $ Poor's said it may downgrade the country's long-term foreign currency rating outlook to stable if the public deficit jumps to above 4% of GDP.