Evening Report-Mar 09.

Rupee was trading rangebound on back of choppy stocks and dollar weakness overseas.Currency was volatile in early trade as banks sold dollars tracking its weakness against majors overseas currencies.An empty economic docket will leave U.S. dollar price action in the hands of broader economic trends. Global equity markets remain suppressed and the prevailing risk aversion will remain supportive for the dollar. Indeed, the IMF predicted that the global economy will sink into its first recession since WWII. The World Bank also warned that the crisis could push 46 million people into poverty as 94 out of 116 developing countries have been hit by the downturn. The deteriorating conditions in emerging markets will most likely lead to political unrest which could lead to more safe-havens flows into the dollar which could remain a supportive factor over the medium term. U.S. equity markets are near critical support levels which could lead to a rebound. An increase in risk appetite would put the dollar at risk for a retracement during the week. However, Republican lawmakers calling for the government to let GM fall into bankruptcy will keep investors cautious until the U.S. auto industry troubles come to a conclusion. Risk sentiment should continue to dictate dollar sentiment as the only significant fundamental event risk on the week is February retail sales on Thursday. Euro traded heavy throughout the overnight session as equity markets were negatively impacted by the U.K. banking troubles and the IMF’s forecast of a global recession. Troubles in Eastern Europe also remain a weighing factor for the Euro as the World Bank report highlighted the troubles in emerging markets. Meanwhile, the Euro-Zone Sentix investor confidence indicator fell to its lowest level . The gauge fell to -42.7 from -36 as the current conditions component dropped to -59.75. The outlook has also dimmed with expectations falling to -23.5 from -18.25, its first decline in four months. The deepening recession and the prevailing banking global banking troubles have offset another rate cut be the ECB.Pound fell below 1.3900 as U.K. bank names continue to take a hit on the back of the government increasing its stake in Lloyds Banking Group. The UK Treasury intends to increase its share of LBG from 43% to 65%, in return for insuring toxic loans worth GBP 260bn via the Asset Protection Scheme. The banking sector was down 9% in early trading which has been a weighing factor for the pound sending it to test 1.3850. BoE has been given the authority to start quantitative easing and is expected to print £150 billion to buy assets in attempt to revive the lending and the economy. Yen declined against the dollar as Japan posted its first trade deficit in 13 years, reducing the currency’s appeal as a haven. Government also reported Japan posted a merchandise trade deficit of 844.4 billion yen in January, along with a 1,100.2 billion yen deficit in trade of goods and services.