Evening report-Aug 11

Rupee fell and closed at 42.16 as banks scrambled to buy dollars for importers.Indian unit was also down as a few banks bought dollars after a finance ministry official said the government may alter cap on spread of external commercial borrowings but there were no plans to ease other ECB norms.It could be negative as far as equity market inflows are concerned.U.S. economic calendar is empty which could leave price action at the mercy of broader economic winds. Dollar weakness could continue as oil has firmed on the back of the geopolitical risk emanating from the Russian-Georgian conflict. Also, expectations for the upcoming U.S. retail sales report are diminishing as the effects from the government’s fiscal stimulus plan abates.Euro rallied above 1.5050 and tested 1.5090 levels on hawkish comments from outgoing ECB council member and the German wholesale price inflation accelerated more than expected on higher fuel prices.French industrial production decreased at a slower pace of 0.4%.sterling rose over 100 point a tested 1.9259 levels with the release of producer price , as the inflation report was expected to show inflation continue to rise. Also, core prices rose to 6.5% as rising energy costs spread to other areas including chemicals and base metals. Although, the prices at the factory gate rose to its highest level at 10.2. Additionally, the 0.6% fall in input prices may signal that slumping growth and falling oil prices is beginning to slow inflation. This may clear the path for the BoE to cut their benchmark rate as they try and head off a recession. Meanwhile, the country’s trade balance deficit increased to -£7.6 billion as rising imports offset a slight increase in exports, showing that consumer consumption has remain resilient despite the housing slump and slowing economy. Euro's weakness against the yen helped keep the dollar down against the Japanese currency.JPY tested a high of 110.40 and was a supported at 109.60.