Evening Reort-March 12.

Indian Rupee pared some of its gains on afternoon and closed at 51.84 levels as importers bought the U.S. unit, but gains in domestic shares continued to help sentiment. Inflation rose to 2.43 percent and factory output data were largely in line with expectations and thus failed to have any large impact on the rupee. India's industrial output fell 0.5 percent The non-deliverable dollar was off lows in line with the movement in the spot market .The fall in NDF rate is spurring receiving in the forwards. Besides banks were also booking profits as premiums had risen sharply. U.S. Dollar has been receiving support overnight as global recession concerns have sparked an increase in risk aversion. If we see U.S. equity markets reverse recent gains then dollar bullish sentiment may continue. The U.S. advance retail sales is expected to show demand fell by 0.5% after January’s unexpected 1.0% gain, as a weak labor market weighed on demand. Indeed, the expected increase in initial jobless claims to 644,000 demonstrates that the job losses continue to mount is expected to negatively impact domestic growth over the near-term. This could lower earnings expectations and send equity traders back to the sidelines today. However, a consecutive month of improving consumer consumption may reignite risk appetite which could lead to dollar weakness. Euro fell to an intra day low of 1.2730 as equity markets started trading lower on further contraction in the Japanese growth report which reignited global growth concerns. The ECB in its March monthly report predicted that inflation will remain “well below” its 2% target for the next two years. This was reinforced by factory gate prices unexpectedly falling 0.5% in January on an annualized basis led by the 0.8% drop during the month. Energy costs fell another 1.5% in the month as falling commodity costs remain a drag on inflation. Yen has gained over 300 bps against the dollar in the past two days despite the final 4Q GDP figures showing further contraction than the initial readings. Japanese growth declined by 13.4% which was the lowest since 1974 led by a sharp decline in exports and business spending. Despite the figures reigniting risk aversion the Yen continued to gain against the dollar which could be a sign that the currency is regaining its safe-haven status. Pound fell to 1.3725 as it gave back most of yesterday’s gains as it was sunk by the dimming global outlook. Sterling had reached as high as 1.3925 as the BoE’s initial quantitative easing efforts were successful. The central bank’s entry into bonds markets drove Gilt prices higher and significantly lowered yields which should help spark increased borrowing. Tight lending standards have sunk the housing market and choked the economy. Meanwhile, consumer inflation expectations for the next twelve months fell to 2.1% from 2.8% for the quarter ending in February. Since the BoE has started to print money inflation expectations will become a concern as the upside risks to price pressure may increase as the pump money into the system.