Evening Report-May 27.

The Indian rupee traded higher in afternoon session and closed at 47.70 levels as gains in domestic equities raised hopes of more capital inflows and higher Asian units also underpinned sentiment. The dollar continues to remain under pressure as the optimism fueled by the jump in U.S. consumer confidence yesterday has carried through Asian and European trading sessions. The improvement in sentiment overshadowed a decline in the S&P/Case Schiller home price index which could get more weight today if the existing home sales indicator confirms weakness in the housing sector. Additionally, the home price index is expected to disappoint the S&P Case Schiller report with a 0.2% gain. A positive housing report will add to the improving outlook for a economic recovery and could add to the bearish dollar sentiment. The Euro regained its footing after falling to an intra day low of 1.3927 after the EUR/USD failed to hold above 1.4000 which continues to serve as formidable resistance. Equity markets higher in Europe are helping support the pair as risk appetite continues to rise following the rally in U.S. market yesterday. A slight increase in French consumer confidence to -40 from -41 continues the trend of increasing optimism which was reinforced by the improvement in business sentiment to 72 from 71. However, the outlook for production significantly declined to -50 from -16 which should be a concern and may be a sign that future growth is still in the distance for the region. ECB member Noyer testifying in front of the French Senate’s finance committee stated that the banking system still has the consequences of the credit crisis ahead of it which leaves potential risks for borrowers. The Pound reached above the 1.600 price level for the first time since November, 2008 as the Sterling continues to benefit from improving optimism but failed to hold the level . Banks in the U.K. approved 27,685 new mortgages in April which missed estimates of 28,000 but was an improvement from the 26,671 the month prior. The housing sector continues to show signs of lift which is helping to put a bottom on the current downturn. The Yen saw some brief support as the merchandise trade balance turned from a deficit into a surplus of 69.08 billion in April. The country saw the rate of decline of its exports slow to -39.1 from -42 which markets took as a sign that the country’s recession is easing. Additionally, small business confidence rose for a fourth month which is another positive sign for growth as they account fro the majority of hiring in the country.