Treasury - Daily Forex for day 20.10.2006

The dollar tumbled against its key rivals on Thursday after a much weaker-than-expected manufacturing activity in the U.S. Mid-Atlantic region raised concerns about the outlook for the world's largest economy. The Federal Reserve Bank of Philadelphia reported its index of business conditions fell to -0.7, well below the analysts' forecast of a 7.0 reading. Weighing further on the dollar, the Conference Board's index of leading indicators rose just 0.1% in September, lagging expectations for a 0.3% gain. Looking ahead, next week's Federal Reserve policy meeting is expected to bring no change to the benchmark rate, currently at 5.25%.

The crown fell back to near three-week lows versus the euro on Thursday, a day before the start of local and 1st round of Senate elections, resisting the bullish sentiment toward other central European currencies. The Hungarian forint proved to lead the regional trend, with the market speculating about an interest rate hike by the NBH as early as next week. By contrast, dovish comments by CNB policymaker Jan Frait have apparently lowered chances that the bank will raise rates before the year-end.