The USD/INR rises ahead of the GST council meeting in India

Source: Fxstreet

September 3, 2025 04:52

• The Indian Rupee falls against the US Dollar at the opening before a two-day GST council meeting.
• Indian Commerce Minister Goyal confirmed that New Delhi is in talks with Washington about a trade deal.
• A strong increase in long-term bond yields worldwide boosts demand for safe havens.

What a surprise! The Indian Rupee (INR) opens slightly lower against the mighty US Dollar (USD) this Wednesday. The USD/INR pair rises close to 88.23 ahead of the two-day meeting of the Goods and Services Council (GST), which aims to review the tax slabs from four to two.

On the eve of Independence Day on August 15, Indian Prime Minister Narendra Modi announced that the government will unveil new segments of the GST to boost consumption around Deepawali, which will be celebrated on October 21.

According to a report from The Indian Express, the central government will abolish the 12% and 28% tax brackets, and will shift these items to the remaining tax brackets of 5% and 18%. This scenario will be inflationary for the Indian economy and may restrict the Reserve Bank of India (RBI) from lowering interest rates in the short term. As if we needed more inflation!

Meanwhile, India's Commerce Minister, Piyush Goyal, expressed confidence in his speech at an industrial chamber event on Tuesday that New Delhi will finalize a tariff agreement with the United States (U.S.). "We are in dialogue with the U.S. for a bilateral trade agreement," Goyal said, as reported by The Economic Times. Goyal added that India is securing new trade agreements with countries such as the European Union, Chile, Peru, New Zealand, Australia, Oman, and has already concluded agreements with the EFTA bloc, the United Kingdom, and the UAE.

India's Commerce Minister Goyal's somewhat positive comments on a trade agreement with the U.S. come at a time when President Trump has been criticizing New Delhi for engaging in "one-sided business" with Washington for a long time.

On Tuesday, U.S. President Trump criticized India again while speaking with reporters in the Oval Office. "We get along very well with India, but for many years, it was a one-sided relationship. India was charging us tremendous tariffs, the highest in the world," Trump said, according to Hindustan Times.

Market Movers: The Dollar trades firmly ahead of the U.S. JOLTS Job Openings data.

• The slight upward movement of the USD/INR pair is also driven by the strength of the Dollar. At the time of writing, the Dollar Index (DXY), which tracks the value of the greenback against six major currencies, rose to nearly 98.50.
• The Dollar is trading firmly as its demand as a safe haven has increased, following the risk aversion sentiment due to rising long-term bond yields worldwide.
• A significant increase in long-term bond yields indicates growing investor concerns about government debt. The rising costs of government borrowing often lead to a decrease in social spending, thereby increasing the appeal of safe-haven bets.
• Internally, the U.S. Court of Appeals ruling against President Trump's tariffs, deeming many of them "illegal," has led to a sharp decline in Wall Street indices. U.S. tech stocks plummeted after a prolonged weekend on Tuesday following the court's ruling against Trump's tariffs, stating that Trump improperly invoked the emergency law.
• Meanwhile, President Trump has announced that he will take the case to the Supreme Court for an expedited resolution on tariffs.
• On the economic front, investors are awaiting the Non-Farm Payroll data (NFP) for August, which will be released on Friday. Investors will pay close attention to the NFP data as the July report heightened market expectations for interest rate cuts by the Federal Reserve (Fed) for the September meeting.
• According to the CME FedWatch tool, there is nearly a 92% chance that the Fed will cut interest rates at the September policy meeting.
• In Wednesday's session, investors will focus on the JOLTS Job Openings data for July, which will be released at 14:00 GMT. The report is expected to show that U.S. employers posted 7.4 million new jobs, nearly in line with the previous reading of 7.44 million.

Technical Analysis: USD/INR consolidates above 88.00

The USD/INR pair remains largely sideways after registering a new all-time high around 88.50 on Monday. The short-term trend of the pair remains bullish as it stays above the 20-day Exponential Moving Average (EMA), which is trading near 87.69.

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

Looking down, the 20-day EMA will act as a key support for the pair. On the bullish side, the pair has entered unexplored territory. The round figure of 89.00 would be the key obstacle for the pair.

Wow! Who would have thought we would see the rupee so weakened? And by the way, I don't believe a bit of Minister Goyal's promises about trade agreements. Trump is right for once! India has been taking advantage for years with its absurd tariffs while crying for reciprocity. What hypocrisy!

The RBI is surely sweating with this upcoming inflation. New GST slabs just before Deepawali? A classic political move to win votes while destroying the economy. The rupee will continue to fall, and I wouldn't be surprised to see it at 90 before the end of the year.

The only thing holding this circus together is that the rest of the world is also a mess. What times to be an investor!