Treasury - Daily Forex for day 03.01.2007

The euro firmed against the dollar on Tuesday, adding to an 11.5% gain versus the U.S. currency in 2006, as investors began the new year by demanding currencies with prospects of rising yields. Hence, the dollar also fell against the sterling and the Swedish crown, where the central banks are also likely to keep raising interest rates in 2007. The minutes of the Federal Reserve's December policy meeting as well as the Institute for Supply Management's reading on the U.S. manufacturing sector, both due later today, will be crucial in determining the next currency movements.

The Czech crown firmed against the euro later on Tuesday, recovering from the day's low around 27.55 per euro but taking little notice to the news that the central state budget closed last year with a 97.3 billion crown deficit. The result came in below the finance ministry's latest forecast of a gap of more than 100 billion crowns, but was above the original target of a 74.4 billion crown shortfall mainly due to extra spending on pensions and an early payment of a guarantee to the central bank. On the last trading day of 2006, the crown traded at around 27.50 against the euro, withing sight of its record high of 27.410 hit on Dec. 20 and 5.2% firmer when compared with the end of 2005. This gain made the crown the second best performing currency among central European countries last year after neighbouring Slovakia.