The Federal Open Market Committee raised the target federal fund rate 25 basis points, to 5.25%. Although, their statement seems to indicate that this may be the last of any rate hikes for a while, as “economic growth is moderating from its quite strong pace earlier this year.”

As a result of the rate hike, the US Dollar fell sharply. The Euro was at $1.2527 before the statement but spiked to $1.2660 later in the afternoon.

Read the June 29, 2006 FRB Press Release for more.

FX Solutions is at it again with another forex trading competition. But this one will be bigger than ever. Contestants must have a minimum of $1,000 in their live trading accounts by July 7 and then they will be eligible to compete with thousands of traders across the globe for over 60 cash prizes amounting to $70,000. The grand prize winner is capable of winning up to $30,000. The winners will be announced August 24, 2006. Here are the details from the FX Solutions press release:

All FX Solutions Live Account holders that meet the eligibility requirements will be placed into one of four brackets via random distribution and will compete in three one-week competitions. Five award winners will be selected from each of the four brackets from the Preliminary Competitions. Winners will be the competitors that have the greatest percentage increase in their account. Top contestants from the Preliminary Competition will be awarded amounts ranging from $250 to $1,500. On July 30, 2006, all Preliminary Competition winners will be combined into one bracket for the “Final Competition.” The three traders with the greatest percentage increase will be awarded $25,000 $15,000 and $10,000 respectively.

Go to www.forexworldcup.com to register for the competition.

A report released today showed that US portfolio inflows dropped sharply in April and were not enough to cover the trade deficit. This led to a decline in the USD’s value agains the euro. The euro briefly hit its session high of $1.2658 before settling at $1.2615, up 0.1% from yesterday, at 1:00pm. According to Forbes:

“To the extent the private sector suddenly decided they didn’t want U.S. securities that meant there were more dollars available on the foreign exchange market and that meant downward pressure on the dollar,” Chris Probyn, chief economist with State Street Global Advisors in Boston, said.

Read more: Dollar slips vs euro on weak April US asset inflows

As investors expect another rate hike by the Fed later this month, the US dollar came close to hitting its five-week high against the euro today. The Labor Department reported that US monthly wholesale prices were up 0.2% in May while the Commerce Department reported that retail sales rose by 0.1% in May. All of this has been in line with forecasts, thereby furthering the prediction that the Fed will raise interest rates soon. Forbes reports:

The upward shift in US interest rate expectations has helped the dollar, as has the general volatility engendered by this spike up. What has been bad for equities and commodities has benefited bonds and the dollar as they are considered to be less risky assets.

Read more: Dollar near 5-week euro highs on Fed rate hike expectations

The US Dollar dropped to $0.7704 against the Euro earlier today, the lowest level since May 2005, before climbing back up to $0.7722 during midday trading in New York. The USD drop came after low U.S. employment data was released last week, thereby lowering expectations that the Fed would raise interest rates this month. Reuters reports:

Reflecting market expectations that the dollar’s interest rate advantage is set to erode, currency speculators have increased their bets that the euro will appreciate against the dollar to record highs, data showed on Friday. “If you look at market positioning you can see that dollar bearish sentiment is pretty much growing across the board,” said Naomi Fink, foreign exchange strategist at BNP Paribas in New York.

Read more: Dollar near 1-year low vs euro as key cenbanks eyed