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- The Indian rupee opens unchanged at around 88.85 against the US dollar.
- India’s Commerce Minister Agarwal noted that the issue of higher tariffs with the US has almost been resolved.
- Investors await US NFP data for September.
The Indian Rupee (INR) opened flat against the US Dollar (USD) on Tuesday. The USD/INR the pair continues to trade in a tight range around 88.85, with investors staying on the sidelines as the United States (US) and India have still not reached a trade deal despite long-running negotiations.
The US has imposed 50% tariffs on imports from India, of which 25% is reciprocal duties and the rest is imposed on oil purchases from Russia, for several months, significantly impacting the amount of goods exported to Washington.
India’s exports to the US fell 12% in September due to higher tariffs, according to BofA Securities research.
Meanwhile, recent comments by US President Donald Trump and India’s top trade negotiator Rajesh Agarwal indicated that the two nations are close to reaching a consensus soon. On Monday, Commerce Minister Rajesh Agarwal said the first part of the bilateral trade deal with the US is “almost done”, dealing with 50% tariffs and market access to the US, and the finalized deal will be announced on a mutually agreed date, PTI reported.
Last week, US President Trump said Washington and New Delhi were close to a bilateral pact, but did not give a time frame. Trump said he would reduce tariffs on Indian goods “at some point” and said the US was “very close” to a trade deal with Delhi, Bloomberg reported. He added, “They don’t love me right now, but they’ll love us again,” and “We’re getting a fair deal.”
The table below shows today’s percentage change in the Indian Rupee (INR) against the listed major currencies. The Indian rupee was strongest against the Australian dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.03% | -0.14% | 0.01% | 0.16% | -0.04% | -0.26% | |
| EUR | 0.07% | 0.03% | -0.05% | 0.09% | 0.24% | 0.05% | -0.19% | |
| GBP | 0.03% | -0.03% | -0.10% | 0.05% | 0.20% | 0.00% | -0.23% | |
| JPY | 0.14% | 0.05% | 0.10% | 0.14% | 0.29% | 0.11% | -0.14% | |
| CAD | -0.01% | -0.09% | -0.05% | -0.14% | 0.15% | -0.04% | -0.28% | |
| AUD | -0.16% | -0.24% | -0.20% | -0.29% | -0.15% | -0.17% | -0.43% | |
| INR | 0.04% | -0.05% | 0.00% | -0.11% | 0.04% | 0.17% | -0.24% | |
| CHF | 0.26% | 0.19% | 0.23% | 0.14% | 0.28% | 0.43% | 0.24% |
The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will be INR (base)/USD (rate).
Daily roundup of market moves: Traders trim dovish Fed bets amid inflation risks
- The Indian rupee has remained in a limited range between 88.50 and 89.00 against the US dollar since the beginning of the month. However, a breakthrough in scope appears likely soon, once the US Bureau of Labor Statistics (BLS) releases official labor market data for September on Thursday.
- The impact of official employment data will be significant for the US dollar and market expectations for the Federal Reserve’s (Fed) monetary policy outlook, as major economic reports were halted due to the government shutdown.
- Ahead of the US Nonfarm Payrolls (NFP) data, Fed officials expressed rising risks in the labor market. Fed Governor Christopher Waller said on Monday that the US central bank should cut interest rates at its December meeting, citing a slowdown in the hiring trend.
- “I’m hearing that businesses are paying for investment in aviation by not hiring, and businesses are saying that low- and middle-income households aren’t spending, and they’re hitting hiring, which is why interest rates continue to come down,” Waller said.
- Similarly, Fed Vice Chairman Philip Jefferson also warned of downside risks to employment, but cautioned against further rate cuts, citing policy being somewhat closer to neutral. “The balance of risks has shifted in recent months, with an increased potential for a decline in employment, but the Fed must move slowly as monetary policy approaches a neutral rate,” Jefferson said at an event hosted by the Fed Bank of Kansas City.
- At press time, the U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, was trading marginally lower at 99.45. The USD Index rallied sharply on Monday as traders trimmed bets on support for further interest rate cuts this year. The likelihood that the Fed will cut interest rates by 25 basis points (bps) to 3.50-3.75% at its December meeting fell to 43% from 62.4% a week ago, according to CME FedWatch.
Technical Analysis: USD/INR remains above 20-day EMA
USD/INR remains sideways below 89.00 for more than two weeks. The 20-day exponential moving average (EMA) near 88.70 continues to act as key support for USD bulls.
The 14-day Relative Strength Index (RSI) is trying to return above 60.00. If the RSI (14) can handle this, fresh bullish momentum will emerge.
Looking lower, the August 21 low of 87.07 will act as key support for the pair. On the other hand, the key barrier will be the all-time high of 89.12.
The most frequent questions about tariffs
Tariffs are duties imposed on certain imports of goods or categories of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism along with trade barriers and import quotas.
Although both duties and taxes generate government revenue to finance public goods and services, they have several differences. Tariffs are paid in advance at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while duties are paid by importers.
There are two schools of thought among economists regarding the use of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially raise prices in the long run and lead to a damaging trade war by inciting tit-for-tat tariffs.
Donald Trump has made it clear in the run-up to the November 2024 presidential election that he intends to use tariffs to support the US economy and American manufacturers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. During that period, Mexico was the top exporter, with $466.6 billion, according to the U.S. Census. Trump therefore wants to focus on these three countries when imposing tariffs. He also plans to use the income generated through tariffs to reduce personal income taxes.
