EVENING REPORT FEB 09

Rupee ended $ 48.58/59and was near three-week highs as investors speculated capital inflows would rise following a rebound in Asian stock mrkets ,but dollar buying by oil refiners checked sharpgain.US dollar seen mixed . The status of the U.S. government’s fiscal stimulus and financial recovery plans will dictate investor sentiment with an empty economic docket. U.S. Treasury Secretary Timothy Geithner announced that the banking plan would be delayed as the new administration tries and pass the stimulus plan, which remains on shaky ground. Although both parties have reached some common ground on the details of the bill, there still remains significant opposition to the government spending as the public grows less in favor of it. Despite the obstacles it appears that the aide package will be passed this week, which may fuel risk appetite and weigh on the dollar. Speculation has grown that GM and Chrysler may be forced into bankruptcy to assure payment of the government loans they received, which could offset much of the impact of the aide package. Euro would fall to as low as 1.2880 as risk aversion gripped markets when the U.S. delayed the announcement of the details of its banking recovery plan. However, the single currency would erase its losses despite more fundamental data point toward a deeper recession. Indeed the German trade surplus narrowed from 9.9 billion to 6.9 billion in December as demand for exports fell for a third straight month. Meanwhile, the Euro-Zone Sentix investor confidence gauge fell to –36.1 from –34.1 . President Trichet has continued to reaffirm that deflation is not a concern for the central bank and that they don’t see the need to approach a zero interest rate policy. However, as the cost of borrowing increases for many of the countries in the economic union including Portugal, Greece and Spain pressure will mount for the central bank to take further action. After falling to a low of 1.4700 . Pound sharply reversed soaring to test 1.4860 on increased London buying. Interest has increased ahead of the BoE’s quarterly inflation report due out February 11th as it is expected to show that prices have started to stabilize and the central bank will most likely indicate that further easing isn’t warranted. The MPC lowered its benchmark rate by 50 bps last week bringing it to 1.00%.Japanese yen rose against the dollar after the U.S. government delayed the announcement of a financial- recovery plan, prompting traders to seek a refuge.