PPI ahead; Oracle backlog surge; Novo Nordisk job cuts - what’s moving markets
Investing.com - The Indian rupee has fallen to all-time lows against the US dollar this week as additional 25% tariffs on India’s exports to the United States took effect, according to Goldman Sachs.
The currency had experienced a brief recovery in mid-August driven by expectations of a potential agreement ahead of the tariff deadline, but has since resumed its downward trend. Goldman Sachs estimates the total effective tariff rate now stands at approximately 32% and has highlighted downside risks to export and current account forecasts.
Equity outflows have been substantial, reaching approximately $5.5 billion over July and August, while bond flows have been mixed with $1.8 billion of inflows between May and August, contrasting with $3 billion of outflows in April. Additionally, the GBI EM Global Diversified Index is considering reducing India’s weight by lowering its cap from 10% to 8.5%, with an announcement expected in September.
The Reserve Bank of India (RBI) is expected to intervene to limit foreign exchange volatility, particularly at current levels, while also likely replenishing foreign exchange reserves during dips in the USD/INR rate.
Goldman notes that the RBI’s short USD/INR forward book remains sizable at around $60 billion, though narrower than the February peak of $89 billion, meaning the central bank needs to purchase US dollars to settle maturing foreign exchange forward positions.
Given these recent tariff developments, their macroeconomic impact, and the current flow picture, Goldman Sachs expects the rupee to remain under pressure and underperform other carry trade candidates and North Asian peers in the near term.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.