- Indian Rupee (INR) is modestly lower after gains yesterday
- The Budget lowered the fiscal deficit target to 4.9%
- US Dollar (USD) is rising against its peers
- Kamala Harris wins support as Democratic nominee
The US Dollar Indian Rupee (USD/INR) exchange rate is almost unchanged after losses yesterday. The pair fell -0.06% in the previous session, settling on Monday at 83.67. At 21:00 UTC, USD/INR trades -0.04% at 83.70 and is in a range of 83.76 to 83.61.
The Indian rupee was modestly lower, and Indian domestic equities experienced some volatility following India’s finance minister Nirmala Sitharaman’s budget for the fiscal year that started April 1st.
India stock markets initially dropped 1.8% during the budget as the finance minister announced a policy to increase capital gains tax amid concerns over an overheating stock market. However, the Nifty 50 recovered earlier losses to finish in the green.
Markets appeared to focus on the budget’s positives, including a narrower fiscal deficit target, spending on infrastructure and boosting employment, as well as double-digit corporate earnings growth expected for this year.
The government allocated billions of dollars in the budget for job creation in regions run by coalition partners. This move was aimed at cementing the coalition and winning back voters after Narendra Modi’s election setback.
Tax changes included a heavy levy on equity investments and lower taxes on foreign companies in order to attract more investment.
Despite the new spending plans, India cut its fiscal deficit target to 4.9% of gross GDP in the fiscal year ending March 31st, 2025. This was down from 5.1% in February’s interim budget, thanks to a surplus of $25 billion from the central bank.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.12% at the time of writing at 104.44, after gains in the previous session.
The US dollar pushed higher today amid ongoing political uncertainty. Kamala Harris is the new Democratic frontrunner after Joe Biden said he was no longer seeking re-election at the weekend. However, a poll on Monday, the first conducted since Biden dropped out, showed that Trump had a two-point lead over Harris at 47% to 45%.
On the data front, new home sales fell in June as home prices hit another all-time high, but existing home sales are still down.
Looking ahead, attention will be on US business activity data tomorrow ahead of GDP data on Thursday and the core PC figures on Friday, which are the Fed’s preferred gauge for inflation.
