FX.co ★ Indian Rupee Holds Near Record Low Despite GST Cuts

The Indian rupee is currently trading close to 88.15 against the US dollar, hovering near its historic low as concerns about the effects of significant US tariffs overshadow India's recent GST reforms. The government has adjusted the GST rates by consolidating the previous four-tier system into two categories of 5% and 18%. Moreover, a 40% rate has been introduced for luxury and sin goods, effective from September 22, to bolster household consumption and help balance revenue deficits. Nonetheless, the rupee continues to feel the strain due to a 50% levy imposed on Indian goods by the US on Russian oil imports. This, coupled with ongoing foreign fund withdrawals from equities, exacerbates the currency's vulnerability. Meanwhile, the US dollar is facing challenges due to a weakened labor market, evidenced by fewer job openings and increased layoffs, leading traders to largely anticipate a rate cut from the Federal Reserve in September, offering some respite for the rupee. All eyes now turn to the release of US nonfarm payroll data for more comprehensive insights into the labor market conditions. Looking ahead, crucial trade negotiations between India and the EU are scheduled to progress next week, set against the backdrop of recent US tariff increases and persistent trade disputes.