- The Indian Rupee (INR) is rising after losses last week
- The Indian government is planning tax cuts to cars
- The US Dollar (USD) is rising versus major peers
- Fed rate cut expectations in focus
The US dollar-to-Indian rupee (USD/INR) exchange rate fell on Monday, after modest gains last week. The pair rose +0.03% in the previous week, settling on Friday at 87.51. At 21:30 UTC, USD/INR trades -0.25% at 87.29 and traded in a range of 87.29 to 87.54.
The Indian rupee gained, alongside domestic equities, as the government plans for sweeping changes to goods and services taxes, which boosted sentiment.
The Indian benchmark index jumped 1% on reports that the government is looking to slash local tax on small cars to 18% and decrease it on premium cars to 40%. This marks the first major consumption tax cut in almost a decade, a major reprieve in the world’s third-largest automobile market.
The tax cuts could result in double-digit growth for passenger cars in India, with sales crossing 5 million units for the year ended March 2027, according to some economists, and is hoped to offset the impact of U.S. President Trump’s threat to impose 50% tariffs on Indian exports from August 27.
The US Dollar is rising against its major peers but falling versus the Rupee. The US Dollar Index, which measures the greenback against a basket of major currencies, is rising 0.32% to 98.15, after modest losses last week.
The US dollar moved higher on Monday as investors focused on Federal Reserve rate cut expectations after last week’s CPI and PPI reports.
While CPI was colder than expected, PPI accelerated sharply, which could point to a stickier outlook for inflation ahead.
Mid last week, the market was pricing in 100% probability of a rate cut in September. This was down to around 85% at the start of this week; as a result, US 10-year treasury yields rose to a two-week high.
Looking ahead, attention will be on FOMC minutes on Wednesday and the Jackson Hole symposium, which starts on Thursday and sees Federal Reserve chair Jerome Powell speaking on Friday.