Select Language

USD/INR edges lower as India revises GST slabs to boost economy

Breaking news

USD/INR edges lower as India revises GST slabs to boost economy

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2025.09.04 13:44
USD/INR edges lower as India revises GST slabs to boost economy

update 2025.09.04 13:44

  • The Indian Rupee gains against the US Dollar at open as the Indian administration reveals a new GST framework.
  • India revises GST tax slabs from four to two.
  • Investors await the US ADP Employment and ISM Services PMI data.

The Indian Rupee (INR) ticks up against the US Dollar (USD) at open on Thursday. The USD/INR pair edges lower to near 88.15 as the Indian government has revised Goods and Services Tax (GST) rates lower to boost consumption.

In late Indian Standard Time (IST) hours on Wednesday, India's Finance Minister Nirmala Sitharaman confirmed, after the 56th GST council meeting, that the government will bring down the four-tier tax framework to two, in which there will be only 5% and 18% slabs, and 12% and 28% tax brackets will be abolished. The administration has introduced a 40% tax slab for luxury items to offset the loss of revenues from the new two-tier framework.

India's FM Sitharaman also announced that the new GST framework will become effective from September 22, which aims to provide financial support to common man and middle-class families of the country.

Lower taxes on discretionary and non-discretionary items would leave more money in the hands of the public, a move that would boost consumption and investment in the economy. Such a scenario could prove to be inflationary for the economy, a move that might restrict the Reserve Bank of India (RBI) from reducing interest rates again in the remainder of the year.

Meanwhile, the consistent outflow of foreign funds from Indian stock markets continues to be a major drag on the Indian Rupee. Foreign Institutional Investors (FIIs) have remained net sellers in all three trading days of September. However, the pace of selling appears to be moderate than what was seen in July and August. On Wednesday, FIIs pared stake worth Rs. 1,666.46 crores from the Indian equity markets.

Daily digest market movers: US Dollar faces selling pressure after weak US Job Openings data

  • A slight downside move in the USD/INR pair is also driven by some correction in the US Dollar on the back of weak United States (US) JOLTS Job Openings data for July published on Wednesday. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades calmly close to Wednesday's low around 98.00.
  • The Bureau of Labor Statistics (BLS) showed that US employers posted 7.18 million fresh jobs, lower than expectations of 7.4 million and the prior reading of 7.36 million. Lower job postings signify a soft labor market, a scenario that allows traders to raise bets supporting interest rate cuts by the Federal Reserve (Fed).
  • According to the CME FedWatch tool, the probability for the Fed to cut interest rates in the September policy meeting has increased to 97.6% from 92% seen before the JOLTS Job Openings data release.
  • This week, the major trigger for the US Dollar will be the Nonfarm Payrolls (NFP) data for August, which will be released on Friday. Investors will pay close attention to the official employment data as it intensified Fed dovish bets after the release of July's report, which showed a significant downward revision in May and June's payrolls data.
  • In Thursday's session, investors will closely monitor the ADP Employment Change and ISM Services Purchasing Managers' Index (PMI) data for August. The ADP is expected to show that the US private sector hired 65K new workers, significantly lower than 104K in July. Meanwhile, the ISM Services PMI is seen at 51.0, higher than the prior release of 50.1.

Technical Analysis: USD/INR pair holds above 20-day EMA

The USD/INR pair ticks down at open, but is broadly sideways, above 88.00 on Thursday. The near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 87.73.

The 14-day Relative Strength Index (RSI) trades calmly above 60.00, suggesting that a fresh bullish momentum has come into effect.

Looking down, the 20-day will act as key support for the major. On the upside, the round figure of 89.00 would be the key hurdle for the pair.

 

Indian Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar - most trade is conducted in USD - and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the 'carry trade' in which investors borrow in countries with lower interest rates so as to place their money in countries' offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India's peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.


Indian Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar - most trade is conducted in USD - and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the 'carry trade' in which investors borrow in countries with lower interest rates so as to place their money in countries' offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India's peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.



Date

Created

 : 2025.09.04

Update

Last updated

 : 2025.09.04

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.

Was this article helpful?

We hope you find this article useful. Any comments or suggestions will be greatly appreciated.  
We are also looking for writers with extensive experience in forex and crypto to join us.

please contact us at [email protected].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

PBOC sets USD/CNY reference rate at 7.1064 vs. 7.1052 previous

On Friday, the People's Bank of China (PBOC) set the USD/CNY central rate for the trading session ahead at 7.1064 compared to the previous day's fix of 7.1052 and 7.1052 Reuters estimate.
New
update2025.09.05 10:15

US President Donald Trump warned of 100% tariffs on foreign chip imports unless firms build in US

US President Donald Trump said that his administration would impose tariffs on semiconductor imports from firms not moving production to the United States, Reuters reported late Thursday. 
New
update2025.09.05 09:41

US President Donald Trump prepares to start North American trade deal renegotiation -- WSJ

US President Donald Trump's administration is set to begin renegotiating the United States (US)-Mexico-Canada free trade deal, the Wall Street Journal reported on Thursday.
New
update2025.09.05 09:29

NZD/USD strengthens to near 0.5850 ahead of US NFP data

The NZD/USD pair attracts some buyers to around 0.5850 during the early Asian session on Friday. The softer-than-expected US job data continue to weigh on the US Dollar (USD). All eyes will be on the US Nonfarm Payrolls (NFP) report for August, which is due later on Friday. 
New
update2025.09.05 09:20

Fed's Goolsbee: Labor market might be deteriorating

Federal Reserve Bank of Chicago President Austan Goolsbee said on Friday that US labor market might be deteriorating, adding that there is a bit of wait-and-see because of uncertainty.
New
update2025.09.05 08:30

USD/JPY holds steady near 148.50, all eyes on US NFP release

The USD/JPY pair flat lines near 148.50 during the early Asian session on Friday. Traders prefer to wait on the sidelines ahead of the crucial US economic data. The highly anticipated Nonfarm Payrolls (NFP) for August will take center stage later on Friday.
New
update2025.09.05 08:16

USD/CHF Price Forecast: Steady near 0.8050, awaiting NFP data

The USD/CHF remains steady at around the 50-day Simple Moving Average (SMA) of 0.8051, consolidates at around the 0.8050-0.8100 figure for the fourth straight day. At the time of writing, the pair trades at 0.8056 up 0.01%.
New
update2025.09.05 07:56

US President Donald Trump signs order sealing Japan tariff deal with 15% rate -- Bloomberg

US President Donald Trump signed an executive order implementing his trade agreement with Japan, which calls for a maximum 15% tax on most of Japan's imports, including automobiles and parts, Bloomberg reported late Thursday. 
New
update2025.09.05 07:47

GBP/USD settles into holding pattern ahead of key US NFP jobs data

GBP/USD slowed to a crawl on Thursday, remaining stuck close to 1.3430 after a volatile showing through the week's earlier sessions. US Nonfarm Payrolls (NFP) are always a high-impact affair, but this Friday's US jobs showdown has taken on an even greater importance than usual.
New
update2025.09.05 06:54

EUR/USD slips to 1.1640 as US labor woes boost Dollar ahead of NFPs

The EUR/USD retreats after reaching a weekly high of 1.1736 on September 1, as economic data from the US drives the Dollar higher against the shared currency, which witnessed a soft Retail Sales report. The pair trades at 1.1640, down 0.12%.
New
update2025.09.05 06:43

Disclaimer:arw

All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.

The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.

  • Facebook
  • Twitter
  • LINE

Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy

I agree
share
Share
Cancel