evening report

Rupee was seen trading in a narrow band of 39.90-40.00 on expectation of outcome of the interest rate meetings of Reserve Bank of India and U.S. Federal Reserve .There are also no fresh clues from market as there was no big inflows from FII .The dollar edged higher after surprisingly strong inflation and manufacturing data suggested the Federal Reserve would not continue to cut U.S. interest rates quite so aggressively. Hotter than expected CPI data out of the Euro zone propelled the Euro through the 1.5960 levels as focus returned to inflation which will likely continue to dictate a restrictive monetary policy from the ECB for the time being. The data printed at 3.6% versus 3.5% as food energy and clothing costs all rose more than expected. With ECB mandated to control price pressures rather than manage growth, today’s number essentially assured the market that Mr. Trichet and company will remain hawkish keeping rates at 4% for the foreseeable future. The pound rebounded from a six-week low against the dollar after stock-market gains boosted appetite for higher-yielding currencies. Gilts fell the most in two weeks after a government report showed the drop in unemployment benefits to a 33-year low easing concern the economy is slowing.