Evening Report-May 28.

Indian rupee reversed losses and closed at 49.60 levels as gains in domestic shares fueled hopes for capital inflows, but a sharper rise was prevented by the dollar's gains versus other majors overseas. India's wholesale price index rose 0.61 percent in the 12 months to May 16, matching the previous week's annual rise. It has been a mixed bag for the dollar as its earlier gains against the Euro and pound have been reversed and it continues to see momentum versus the Yen. Scanning the headlines you can see the conflicting sentiments as surging bond yields are causing fear that government efforts aren’t working and will reduce the chances of a recovery, while improving fundamental data and optimism is increasing its chances. The expected 0.5% rise in U.S. durable goods orders should add to the improving outlook for a global recovery which could weigh on the dollar as risk appetite picks up. U.S. futures are pointing toward a higher open despite the weakness in Europe which may be in anticipation of the positive fundamental data. Initial jobless claims and new home sales are also due for release and are forecasted to improve mildly which will add to the increasing optimism. Euro reached as high as 1.3885 on the back of a positive labor report which showed unemployment easing back to 8.2% from 8.3% as the economy only lost 1,000 jobs. Economist were expecting German companies to slash 64,000 workers from their payrolls as falling demand for exports continues to weigh on revenues. Meanwhile, the retail PMI indicator fell to 47.1 from 48.4 as weak labor conditions in the region continues to cause consumers to retrench. This was evident as the Euro-zone consumer confidence reading remained unchanged at -31. However, economic confidence which is the more closely watched figure improved to 69.3 from 67.2 as low interest rates and government spending is raising the outlook for future growth. The single currency reversed some of its losses from yesterday and continues to find support after the unemployment figures .The stabilization of the German labor market will go a long way in helping the Euro-zone get back on track and adds to the positive signs that the recession is bottoming. After posting a low of 1.5850 Cable rose and is trading at 1.5949 levels with not much data in hand. USD/JPY continued it s bullish momentum through Asian trading which pushed the pair just shy of the 200-Day SMA at 97.20. Japanese demand for dollar denominated assets on the back of an improving outlook for the global economy has been a steady driver of price action. The Yen didn’t receive any support from an improvement in retail trade of 0.6% in April. The improvement in domestic demand is another sign that confidence is rising in the country. Therefore the demand for carry start is expected to pick up which could signal more weakness ahead for the Yen.