Evening Report-Aug 26.

Steady demand for dollars from corporates and short-covering pushed the Rupee down to 17-month lows.U.S.Dollar extended its dramatic rally of the past month, hitting its highest this year against a basket of currencies as a disappointing business climate indicator added to the view that economic weakness, traders were bracing for a pair of housing reports and a key reading on consumer confidence.Greenback rocketed higher versus the Euro when data revealed that German business confidence fell much more than expected. Meanwhile, a report showed that the German economy contracted 0.5% sequentially in the second quarter raising the spectre of recession in the euro zone and fuelled speculation of interest rate cuts.The dollar hit a new 2-year high of 1.8350 versus the Sterling up a penny from its overnight levels amid speculation that the European Central Bank and Bank of England will be compelled to cut interest rates in orders to deal with economic weakness.The dollar was up 0.4 percent at 109.92 yen heading up towards 110.66 yen hit earlier in the month for the first time since early January.