Evening Report-Nov 03.

Indian Rupee ends at 48.60 levels and stayed firm against the U.S. dollar as most banks sold the greenback on behalf of foreign institutional investors noting the firm trend in domestic share market.The sentiment for the rupee has changed. Dollar sales by exporters also helped the Indian unit to rise against the greenbackThe dollar after its strongest month in seventeen years started November with some signs of weakness as risk appetite continues to grow. There are several story lines that will play out over a week that may determine the near-term course of the greenback. Rate decisions by the RBA, ECB and BoE, a U.S. presidential election and an expected 180,000 decline in non-farm payrolls may add up to a volatile week of price action. Today’s economic calendar will also present event risk in the U.S. ISM manufacturing report. Activity is expected to decline to 42.0 from 43.5, but we may see a more pronounced contraction with the New York, Philadelphia and Chicago regional readings falling sharply. Although, risk sentiment may continue to dictate price action, the declining interest rate expectations in Europe may add support fro the dollar. However, the deteriorating fundamental picture for the U.S. may weaken the argument that the American economy may be the first to emerge from the credit crisis which could weigh on the dollar.The Euro held onto its earlier gains despite a lower revision in its final manufacturing PMI reading. Output fell to 39.8 from 44.1 with new orders holding at 36.2 due to a drop in global demand and a domestic economy entering a recession. The reading for Germany led the way as the headline print dropped to 42.9 with new orders slipping to 39. The region is clearly headed to a recession as the EU commission has reduced its growth expectations to 0.1% . The ECB is expected to cut rates by 50 bps on November 6th at their policy meeting as the diminishing threat of price pressures have given the central back the green light to continue easing. Indeed, the PMI input price component showed costs easing to 51.4. Credit Suisse overnight index swaps are pricing in 128 bps of rate cuts over the next twelve months .The Pound pared earlier gains falling to 1.6200 after a test of 1.6400 despite an improvement in manufacturing activity. The U.K. October manufacturing PMI indicator unexpectedly improved to 41.5 from a revised 41.2 .However, the reading is only a slight improvement from the previous month’s record low and although there were improvements in new orders the outlook remains bleak for the economy. The BoE has all but guaranteed a 50 bps point cut with rhetoric from various members over the past week led by David Blanchflower. The increasing expectations of deeper easing could weigh on the Pound leading up to the policy meeting. Japanese Yen Consolidated Above 99.00 levels .