The US Dollar fell against the Indian Rupee as the latter currency recovered from a three-and-a-half month low on account of tax worries. Retrospective taxation will be implemented in India causing worries amongst investors—fears that escalated when a finance ministry source stated that despite requests, foreign portfolio investors wouldn’t be exempt. The official stated: ‘Government will not yield to the demand of FIIs (foreign institutional investors) to withdraw the tax notices issued to them.’
The anxiety over the retrospective tax has seen the Rupee register its lowest figure to date in 2015 and fell to a fresh monthly low on Monday of 62.91. Meanwhile, concerns over Indian banks not reducing borrowing costs in line with the Reserve Bank of India have heightened and RBI Governor Raghuram Rajan has hit out at institutions. Rajan stated: ‘Banks are sitting on money. Their marginal cost of funding has fallen. The notion that is has not fallen is nonsense.’ Furthermore, it appears as if many experts aren’t expecting a change in bank rates any time soon with many economists highlighting that the Indian nation works differently to others. Industry expert Arundhati Bhattacharya commented: ‘In India things work differently from the international banks. We are very deposit-based.’
Meanwhile, the US is experiencing an extremely quiet day for data lending a lot of the ‘Buck’s’ movements to global developments. Monday saw the Chicago Federal Reserve’s National Activity Index contract by -0.42 in March, despite expectations to come in at 0.10 after the previous month’s -0.18 disappointment. Furthermore, Federal Reserve official William Dudley spoke on the topic of interest rate hikes and suggested that he hoped data would strengthen and warrant higher borrowing costs this year. Dudley stated: ‘Hopefully the data support a decision to lift off later this year.’
However, not everyone was impressed with Dudley’s statements, economist Tom Simons said: ‘This is a dovish shift from an already dovish forecast.’ The statements from Dudley come just a week after Fed official Dennis Lockhart suggested that the Fed shouldn’t hike rates in June as many economists have suggested could occur, instead opting for lower and slower rate rises. The US Dollar is likely to experience more movement on Wednesday with the release of US MBA Mortgage Applications and Existing Home Sales stats.