Dollar Rises Against Indian Rupee Wednesday

USD/INR: The U.S. dollar rose against the Indian rupee on Wednesday ending 0.28% higher at 54.48. Earlier yesterday the rupee traded flat on importers demand for redemption of foreign currency convertible bonds amid expectations of inflows after US fiscal cliff deal was reached Indian companies will have to repay for FCCB's worth $1.3 billion maturing by March.

Rupee fell during European session after the EUR/USD pair witnessed a fall blamed mostly due to profit booking. Dollar strength is expected in short run due to demand from Gold importers ahead of a possible import duty hike. The report is expected to show a consistent improvement in Jobs. US December Manufacturing PMI had showed the job creation in manufacturing sector at eight month high.

Meanwhile hours after lawmakers reached a deal to avert the so-called fiscal cliff, the International Monetary Fund said the US government needs to do more to put the country's public finances back on a sustainable path without harming a fragile economic recovery. In addition, Moody's Investors Service said the outcome of upcoming negotiations will determine whether the ratings firm puts the country back on a stable outlook, or downgrade it.

The firm said further measures are needed beyond the tax deal to support the country's triple-A status. Moody’s comments on US rating will keep risk on sentiment under check stoking demand for haven currencies. Markets are expected to stay flat ahead of the critical nonfarm payrolls release in the US today.

USD/INR is expected to open higher around 54.55-54.60 tracking overnight losses in EUR/USD pair. Pair is likely to trade in range of 54.75 to 54.45 today.

EUR/USD: In Asian trading today, EUR/USD is down 0.15% to 1.3023. German unemployment change surprised markets by falling more than expectation. The number of people out of work rose a seasonally adjusted 3,000 to 2.942 million far less than economists’ prediction of 10,000. In Germany, small and medium-sized companies plan to add employees this year even as most of them expect the economy to stagnate, a poll of more than 3,000 businesses by the BVMW lobby of medium-sized firms showed on December 27.

EUR/USD rose sharply from 1.3125 to 13155 after the German jobs report. However the pair could sustain the gains and fell to 1.31 levels. EUR/USD is likely to fall upto 1.2981 today. Any surprise on the US employment front is likely to boost some risk on buying. Other than that German Retail sales and eurozone PMI service data will be watched out by markets.

GBP/USD: The British pound was higher against the U.S. dollar on Wednesday. Sterling too followed the EUR/USD pair yesterday and extended its fall after a weaker than expected construction PMI reading for December. Construction PMI fell to 48.7 against the expectation of 49.3. Construction related employment dropped for third straight month, while confidence in construction activity is now lower than the 4 year post recession average.

Meanwhile House prices fell 0.1% on the month in December and were 1% lower on the year in 2012, reversing a 1% rise in prices during 2011, Nationwide said. The average price of a home in the U.K. was 162,262 pounds ($263,740) in December. Nationwide said activity in the housing market is likely to remain subdued this year despite low interest rates and a Bank of England scheme to boost lending.

On the other hand, UK lenders are poised to boost credit in first 3 months of 2013. The central bank's quarterly survey of credit conditions found lenders made more home loans available to would-be buyers in the final three months of 2012 and plan to increase the supply of credit available for house purchases further in the first three months of the New Year. The Survey finding has ensured that FLS scheme is bearing fruit. However depressed housing market coupled with job losses will make it difficult for banks to find borrowers going ahead.

As for today, GBP/USD is expected to trade sideways ahead of the US NFP data.