Evening Report-April 29.

The Indian rupee extended gains and closed at 50.03 levels as stocks rose over 2 percent and the dollar's weakness against major currencies overseas continued to support sentiment. Reserve Bank of India may cut its short-term lending and borrowing rates by a further 25 basis points after a new government assumes power in May The dollar has been under pressure as markets have started to look past the “swine flu” and bank stress tests and focus on the improving fundamental data. Indeed, yesterday’s jump in consumer confidence was a catalyst to reverse sentiment which has carried through as markets prepare for a U.S. GDP report which is expected to show the pace of contraction for the economy has slowed from 6.3% to 4.7%. The slew of stimulus and availability of cheap credit has raised optimism that the economy will regain its footing and return to positive growth by 2010. The FOMC policy decision is also ahead with expectations that the central bank will leave their benchmark rate at 0.25%. However, we could see the Fed announce additional quantitative easing measures or at the very least give an update on the impact of current efforts which will provide potential event risk. The Euro reached as high as 1.3240 on the back of improving confidence and increasing risk appetite now that fears from the “swine flu” pandemic have eased. Economic confidence in the region improved to 67.2 from 64.7 which was the highest in almost a year. Government stimulus plans and easing inflation has helped improve consumer’s purchasing power and their outlook. This was evident in the improvement in the retail PMI gauge which rose to 48.4 from 44.1. Although Easter spending helped boost the consumption numbers, there are clear signs that consumers are starting to open up their wallets. The comments come on the heels of remarks from committee member Nowotny who said that the ECB stands ready to use unconventional measures. Therefore, markets will begin to scrutinize any additional rhetoric the may come from members as the central bank appears to be divided on the issue. Further evidence of improving risk appetite came from yen weakness which had been the strongest performing currency during the heightened fears from the health crisis. The dollar/yen has rallied to 97.17 levels and was supported at 96.48 .Pound has also benefitted from the improving optimism with sterling/dollar breaking above 1.4739. The pound may continue to find support if the risk appetite continue as there is very little event risk on the economic docket.