Evening Report-Jul 20.

Indian rupee soared high against the U.S. dollar and closed at 48.19 levels as the local stock market rose more than 2%, while the dollar's weakness against major currencies overseas also underpinned sentiment. U.S dollar has come under pressure over night after a surge in risk appetite on the back of a possible solution for troubled lender CIT . The main credit source for over 300,000 small businesses has been on the brink of bankruptcy and may announce an agreement with bondholders to receive $3 billion in financing. The company’s possible bankruptcy has been seen as a possible shock to the system but the government’s refusal to save them was a vote of confidence that the economy was stable enough to withstand it. The removal of the threat has sparked optimism that the credit crisis is at the end leaving traders to focus on normal market conditions. Therefore corporate earnings will again garner focus this week with several blue chip names yet to report. The economic calendar is empty today and with only existing home sales as a potential market moving release on the week, the broader theme of risk appetite should continue to drive dollar flows. The Euro has reached back above the 1.4200 price level for the first time since June 5th, as European equity markets advanced for the sixth straight day. Currency traders chose to ignore the largest drop in 40 years for German producer prices as an improving outlook for growth offset the potential deflation risks. German factory gate prices fell 4.6% from a year ago, a full percentage point lower from May’s -3.6% reading. The continued disinflation for the region will keep the ECB on hold as they maintain their price stability focus and goal of maintaining inflation near their 2% target.The central bank appears to be in a wait and see mode as they look to assess the impact of their recently launched covered bond purchase program. They have settled EUR1 billion of the allocated EUR60 billion plan which is expected to be completed by the end of June 2010. We could see sentiment readings have a significant impact on price action this week with subdued interest rate expectations The Euro-Zone PMI and German IFO readings are due out and if optimism continues to build then we could see continued support for the Euro with a test of 1.4338.The Pound rose above 1.6500 as it found support from the improving outlook for global growth and continued signs that the U.K. housing market is stabilizing. Rightmove LLC reported that home prices in July rose by 0.6% which raised the annualized reading to -3.1% from -5.5% as an increase in lending is starting to underpin demand. The BoE released a report today that showed lending from the six major banks increased in June, which could inspire Britons to increase consumption and spur domestic growth. The improving outlook may continue to be a source of sterling support leading to a test of 1.6746. The dollar slipped against the yen and tested around 94.79 levels.Movement s were limited due to holiday in japan