Evening report-sep 17

The rupee rose by 60 paise to 46.28 against the greenback in early trade following RBI's move to sell dollar to augment supply in the domestic forex market. Rupee trimmed gains in afternoon session as most banks bought the greenback to avail the arbitrage in the non-deliverable forward market. Currency closed at 46.32 against the greenback owing to recovery in other Asian bourses and intervention of RBI to inject liquidity into the system following collapse of two global financial giants, and said it would continue to sell dollars Economic calendar for the U.S. is fairly light but volatility Persist as the U.S. docket lacks market moving potential . The current account deficit is expected to increase to -$179.3B from -$176.4B in the first quarter, which could lower growth expectations for the world’s biggest economy as global demands waver. Meanwhile, Housing starts and building permits are anticipated to fall to 950K and 925K from 965K and 937K respectively, which could fuel bearish sentiment for the dollar. However an unexpected rise in the housing data could provide dollar support, which would allow the greenback to extend its gains against the major currencies. Euro fell back after hitting a high of 1.4268 during the overnight Asian session, and has held within a tight range between 1.4120 – 1.4271 On the economic docket, the Euro-Zone trade deficit widened to a new record high of 6.4B from a revised reading of 3.5B in June and may fall further into negative territory as foreign demands fade. Slowing demands paired with stalled growth suggests that that economic activity may continue to falter for the rest of the year and could force the ECB to lower the interest rate by next year. Meanwhile construction output fell for the fifth consecutive month, slipping to -3.3% from a revised reading of -3.0% in June. Pound gave back gains after reaching an intra day high of 1.7980 and slipped down to1.7784 and remains range-bound between 1.7780 – 1.7980. U.K. labor market weakened further as jobless claims surged to a fresh record high of 32.5K. The claimant count rate increased as well rising to 2.8% from 2.7%. The ILO unemployment rate ticked higher as firms continued to cutback on employment rising to 5.5% from 5.4% in June. The bigger than rise in unemployment suggests that economic activity may deteriorate further as firms continue to cutback on employment, which may lead the BoE to reduce the benchmark interest rate by next year. USDJPY dipped to an intraday low of 105.14, but bound back to hold above 105.70. The Bank of Japan voted unanimously to leave the interest rate unchanged at 0.50% as the world’s second largest economy continues to face high inflation and slowing growth. The central bank noted that economic activity remains sluggish and went on to say that tensions in global financial markets have increased and there are downside risks to the world economy. With Lehman Brothers filing for bankruptcy and AIG taking a $85B infusion from the Fed, the BoJ has increased their efforts to calm the markets by injecting 5.5 trillion yen .