evening report feb 19

Rupee rose and closed at 49.62 as exporters sold dollars on a view a sharp sell-off in the local currency this week was overdone.India's inflation eased to a 13-month low, opening door for the central bank to reduce its interest rates.Thursday, the Ministry of Commerce Industry said inflation, based on the wholesale price index fell to 3.92% in the week ended February 7 from 4.39% recorded in the previous week. Dollar remained firm.The U.S. government made another attempt to put a floor under the housing crisis when President Obama announced the details of a $75billion foreclosure prevention plan. The measure helped calm fears which have stopped the bleeding of equity markets. The increase in risk appetite that was generated during overnight trading is expected to continue today as Dow futures were up over 75points which could lead to further dollar weakness as investors sell U.S. treasuries for riskier assets. . The Philadelphia Fed manufacturing reading is expected to decline to -25 as weak domestic and global demand has stalled activity. The data could limit the potential for dollar weakness as traders realize that despite the government’s efforts the U.S. economy is far from on the road to recovery. The Euro rallied low of 1.2516 to a high of 1.2674 as Asian and European stocks ended their skid. However, the gains may be limited as former support at 1.2700 may turn into resistance. There was no fundamental data to impact price action but sentiment towards the European economy remains negative and with the ECB expected to cut rates at their March policy meetingAs the rest of the developed nations head toward a zero interest rate policy the ECB has refrained from following as they fear sowing seeds for future troubles. The British Pound found support on the increasing optimism sending it rose nearly 300 bps from low of1.4104 to a high of 1.4150.Britons borrowed £3.3 billion less in January which was a sharp decline from the £16.5 billion the month prior, which could signal that tomorrow’s retail sales numbers may be worse than expected. However, the decline was better than the £7.0 billion that was expected which continues the trend of U.K. The Yen has continues to weaken as the currency has started to lose its safe-haven status due to concerns over the Japanese economy. The global downturn, a strong Yen and the inability of corporations to generate funding has sent the economy into its worst downturn in 35 years. Additionally, with other countries now on the verge of implementing a ZIRP the Yen has lost its attractiveness as a funding currency.The BoJ keep its benchmark rate at 0.10% as expected but failed to outline further measures to increase purchases of short-term government bills as markets were expecting pushed down JGB’s.