Evening Report-Feb 24.

Rupee falls and closed at 49.84 against dollar after having touched an intraday high of 49.79 as banks bought dollars after Standards & Poor's cut India's long-term sovereign credit rating outlook to Negative from Stable.Bonds are trading lower as the ongoing auction of long dated securities has created nervousness about further borrowings by the government. S&P cut India's credit rating owing to the country's huge fiscal deficit and said the gap may widen further if the soon-to-be elected government announces more stimulus packages but the currency's slide was limited as banks sold dollars for exporters and also as local shares were off lows.The non-deliverable forward dollar/rupee rate erased all and booked profits.The concerns over the banking industry sunk U.S. equity markets and the prevailing risk aversion will continue to be a supportive factor for the dollar.The lack of communication from U.S. Treasury Secretary Tim Geithner has help fuel the fear as the government has yet to give more specifics on their plan of action to deal with the toxic assets that are plaguing bank’s balance sheets. President Obama will address Congress and the nation today and his remarks could help restore confidence the remainder of the week. However, the economic calendar today is expected to bring more sobering news as consumer confidence, home prices and manufacturing are expected to decline further. The data will only increase expectations that the current recession will deepen and add to risk aversion which could send the dollar higher on the day. Euro made a steady climb traded to reach as high as 1.2800 despite the German IFO reading unexpectedly declining to 82.6 from 83.0. Economists were forecasting that business sentiment would remain flat as a German stimulus package and renewed banking concerns would offset each other. However the indicator did see improvement in its expectations component for the second month which could be a sign of future growth. The improved outlook may be based on expectations that the ECB will continue to cut rates and the dip in the current assessment reading bolsters the argument for further easing. Meanwhile industrial new orders falling by another 5.2% in December demonstrates the current weakness in the economy and further justification for another rate cut. The dollar/yen pushed above the 95.50 handle for the first time since December 1st as the deteriorating outlook for the Japanese economy continues to weaken the local currency. This week’s economic calendar is expected to show household spending slowed by another 5.8% which will erase any hopes that domestic growth could offset the impact of declining global demand for Japanese exports. The clear change in sentiment for the Yen could inspire the BoJ to intervene to weaken the currency further in hopes that it would help make Japanese goods more desirable. The Pound consolidated above the 1.4500 price level despite a slight increase in mortgages to 23,376 from 22,416 in December. The mild improvement doesn’t offset the fact the year saw a 43% decline for a year earlier. Meanwhile, total business investment for the 4Q fell 3.9% which was better than expectations of -4.2%, which demonstrates that activity hasn’t completely dried up. However, if it continues to hold then may see the pound remain range bound leading to another test of support at 1.4100.