Trump Tantrum: Indian Rupee Likely to Weather Initial Shock of New US Presidency
Short-Term Volatility Amid Transition
The transition to Donald Trump’s presidency has sparked significant global economic discourse, with particular attention to its effects on emerging markets like India. A report by the State Bank of India (SBI) suggests that while the Indian rupee has experienced some initial turbulence following the U.S. election, this period of volatility is likely to be short-lived.
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Historical Trends: Rupee’s Stability Under Republican Leadership
Historical data reveals that the Indian rupee has typically performed better under Republican administrations than Democratic ones. Since the Nixon era, Republican tenures have often coincided with relative rupee value stability.
Interestingly, the SBI report highlighted, “Contrary to market perceptions, the rupee appears more vulnerable under a non-Trump or Democratic regime.” Analysts believe that despite initial concerns, the rupee’s response to Trump’s presidency does not resemble the sharp volatility witnessed during the 2013 "Taper Tantrum."
2024: A Year of Transition and Pressure on the Rupee
The rupee began facing downward pressure in the latter half of 2024, driven by capital outflows and a strengthening U.S. dollar. The dollar’s surge following Trump’s electoral victory in November intensified the rupee’s depreciation.
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As of now, the rupee has weakened approximately 3% against the dollar. However, the SBI report reassures that this depreciation remains modest compared to other global currencies, placing the rupee among the more stable performers.
Domestic Resilience Amid External Pressures
Despite external challenges, the domestic foreign exchange market demonstrated resilience in the first half of 2024. Factors such as India’s inclusion in global bond indices bolstered capital inflows, cushioning the rupee from steeper declines.
“Till date, the rupee has depreciated by ~3% against the US dollar, still in the lowest echelon when compared with other countries,” the report noted, underscoring the currency’s relative stability amid global headwinds.
Outlook: Stabilization in Sigrump Tantrum: Indian Rupee Likely to Weather Initial Shock of New US Presidency
The transition to Donald Trump’s presidency has sparked significant global economic discourse, with particular attention to its effects on emerging markets like India. A report by the State Bank of India (SBI) suggests that while the Indian rupee has experienced some initial turbulence following the U.S. election, this period of volatility is likely to be short-lived.
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