Evening Report-Jan 07.

Rupee closed at 48.79 per dollar, from its previous close of 48.66/69, due to dollar demand from foreign funds following a steep fall in the main stock index. The dollar held near its strongest in three weeks against the Euro earlier on speculation that U.S. President-elect Barack Obama s $775 billion package of tax cuts and government spending will help the economy recover from a recession. Today will we get a glimpse into the state of the labor market with Challenger job cuts and ADP employment figures due to cross the wires. November’s ADP figures have already been significantly revised lower to a loss of 472,000 from 250,000 which is the most since records began in 2001. Euro rose against the dollar and the yen on speculation that the European Central Bank will cut interest rates at a slower pace than its major counterparts. Derivatives trading showed the ECB will cut borrowing costs by at least 25 basis points at a meeting on Jan. 15, still leaving its benchmark rate higher than the 0-0.25 percent in the U.S. and 2 percent in Britain The German Federal Statistical Office said that the ILO jobless rate stood at a seasonally adjusted 7.1% in November, compared with 8% recorded in the previous year. yen showed weakness against the European currency while edged higher against the currencies of US and UK. British pound fell snapping a two-day gain. However we could see pound weakness heading into the rate decision with the potential for sharp moves in either direction depending on the comments from the central bank. Conversely a signal that a ZIRP is inevitable could lead to Pound weakness.