By Amar Singh, Reena Walia (Angel Broking)

USD:

- The Dollar Index weakened yesterday as the FOMC meet put pressure on the dollar. As expected the US Federal  Reserve  did   not  raise  interest  rates  and maintained   saying   that   rates   would   be   kept   at exceptionally low levels for an extended period of time.

- This is bearish for the dollar and hence the index faced pressure  on  the  downside.  The Greenback traded sharply lower against European majors as well as commodity currencies while equities rose again after some retreats.

- The FOMC suggested that economic activity has continued to pick up. Conditions in the financial markets remain unchanged over the period.

- We expect the Dollar Index to trade with a negative bias as lower interest rates would keep a check on the rise in the dollar from the short to long-term DersDective.

EUR:

- The Euro gained against the dollar on Wednesday as demand for higher-yielding currencies was strong as the US Federal Reserve kept interest rates unchanged. Due to this decision of the US Fed the European currency could get a boost as risk appetite in the financial markets could rise.

- The European Central Bank (ECBJ is expected to issue their policy statement today and could leave interest rates unchanged.

- The ECB may signal today that it is moving close to withdrawing emergency stimulus measures but may not provide details as policy makers debate an exit strategy.

- ECB president jean Claude Trichet may indicate that the ECB is thinking about a change of strategy and announce more in December.

JPY:

- The Japanese Yen depreciated on Wednesday as US Federal Reserve's statement lowered demand for low-yielding currencies as risk appetite emerged.

- Bank of Japan Governor said a recovery in  emerging economies has reduced downside risks for Japan's economy. The emerging and commodity exporting countries are expected to continue growing at high rates, risks have become balanced.

- We expect the Japanese Yen to continue to depreciate and feel pressure on the downside as higher risk appetite could decrease demand for low-yielding currencies. However, sharp depreciation will be protected as Japan's economic risks have been reduced. This will help to control sharp depreciation in the Japanese currency.

INR:

- The Indian Rupee appreciated on Wednesday as a bounce back in equities  provided  relief to weak sentiments over a possibility of capital outflows from the economy. The benchmark equity index SENSEX jumped 507 points yesterday and provided a cushion to the downside in the Rupee.

- A weaker dollar in the overseas market also provided support as markets awaited a policy decision from the US Federal Reserve over interest rates later in the day.

- Yesterday's  gain  in  the  Rupee  is  linked  to  the movement  in  the  equity markets  and  higher  Fll inflows in the coming days could push equities higher and help the appreciation in the Rupee.

- We expect the Rupee to appreciate as the long-term trend remains intact. Recent decline in equities had put pressure but in the near-term we also expect equity markets to stabilize.