Evening Report-Aug 27

Rupee recouped all its losses and inched up against the U.S.dollar with government-owned banks selling the greenback, presumably on behalf of Reserve Bank of India.There was a sharp movement in dollar/rupee from 43.90 to 43.64 rupees. The over 1% fall in local share market had also prompted some banks to buy the greenback, expecting demand from foreign institutional investorsU.S.Dollar was on the defensive against other major currencies ahead of the latest report on durable goods orders and rising oil prices on the back of a tropical storm threatening the Gulf of Mexico.A larger than expected decline in orders will raise recession concerns once again and with the housing market yet to bottom and financial sector concerns remaining, we could see the dollar give back some of its recent gains. Dollar retreated against a basket of currencies while hawkish rhetoric from a European Central Bank policymaker lifted the Euro.It got a further shot with German import prices surging to an 8 year high on the back of higher oil prices, rising to 9.3% from 8.9% in June. Higher import prices does not bode well for Europe’s largest economy as companies continue to battle slumping demand and shrinking profit margins. However, August inflation data from the various German regions showed prices easing as much as 0.4%. The fall in CPI demonstrates that dropping oil prices and slowing growth are relieving price pressures, and may give the ECB the green light to abandon their price stability mandate to focus on promoting growth.British Pound showed strength testing 1.8450 Amid High Volatility and speculation that slowing economic growth in the Euro zone and UK will compel central banks across the Atlantic to slash their respective interest rates in the medium-term.USDJPY weakened as risk aversion is creeping back into the markets on the back of lingering concerns financial sector concerns and geopolitical risk.