Broker's Notes: Indian rupee, Sterling and Australian dollar decline

Sterling

Sterling fell to session lows against the dollar and euro on Tuesday after a lower-than-expected reading in UK factory orders. The Confederation of British Industry survey's total order book balance dropped to -28 this month from -17 in September, below expectations for a reading of -19. Sterling fell more than 30 pips to a session low of $1.5773. The euro extended gains to hit the day's high of 88.25 pence.

US dollar

The US dollar index firmed 0.3 percent to 77.281. Technical charts suggest that it needs to extend above its Oct. 12 high of 77.93 to signal a short-term bottom is in place after Friday's 10-month trough of 76.144. Treasury Secretary Tim Geithner gave a brief fillip to the dollar after he said the United States would not engage in dollar devaluation and also needed to work hard to preserve confidence in a strong dollar. The comment had little lasting impact beyond being a reassurance from the U.S. for investors to maintain confidence in the dollar as the world's reserve currency, after the greenback's fall of the past few months, and as tensions stir ahead of meetings of the G20 on talk of competitive devaluations.

Indian rupee

The Indian rupee on Monday snapped a three-day winning streak as the dollar's gains versus major units overseas weighed, but hopes for capital inflows stayed firm with the launch of the country's largest-ever share sale. The partially convertible rupee closed at 44.36/37 per dollar, 0.6 percent below 44.10/11 at close on Friday, when the rupee rose as high as 43.95, its highest since Aug. 29, 2008. The rupee traded in a band of 44.1800-44.4150 during the day. On Friday, the Reserve Bank of India governor Duvvuri Subbarao said the central bank will intervene in the forex market if inflows turn lumpy.

Australian dollar

The Australian dollar fell 0.3 percent to $0.9867, correcting further after charging to parity with the U.S. dollar on Friday. It initially firmed after the Reserve Bank of Australia's minutes from its on Oct. 5 meeting said the arguments to hold or hike rates were finely balanced, but later gave up the gains. The RBA, which has been raising rates when the likes of the U.S. and other developed economies have been looking to ease, judged it had the flexibility to keep rates unchanged in October as a rising local dollar tightened monetary conditions, while domestic credit growth remained weak and global growth uncertain.

Euro

The euro has failed to clear $1.4000 again after Friday's surge above $1.4100 and this was seen as a caution by some that more long euro/short dollar positions could unwind, with the euro's Oct. 12 low of $1.3775 seen as a possible target. The euro was flat at $1.3933, well below Friday's eight-month high. Initial support is expected at $1.3825, with resistance up at $1.40 and a move above $1.4050 needed to restart its rally.

Source: Richcomm Global Services, DMCC, Dubai