US President-elect Donald Trump’s upcoming second term is expected to have a temporary impact on the Indian rupee, a recent report by the State Bank of India (SBI) revealed. The report describes this short-term effect as the “Trump Tantrum,” a term used to characterise rupee’s response to Trump’s presidency.
The report suggested, though rupee might experience some initial turbulence during the early days of Trump’s presidency, it is likely to stabilise soon after.
“Empirical evidence suggest that Trump Tantrum for INR will be a short-term phenomenon, and rupee should adjust post the initial shock of early days of Presidency,” it noted.
Does the rupee perform better under Republicans? What do trends say
The analysis indicated that historically, rupee has performed better under Republican administrations as compared to Democratic ones.
Contrary to popular belief, “The rupee appears more vulnerable under a non-Trump or Democratic regime.”
Reviewing trends since the Nixon era, rupee has showcased relative stability during Republican presidencies.
Prediction
Analysts are confident that the current volatility is temporary and will not reach the levels seen during the “Taper Tantrum” of 2013, when global markets were rocked by the US Federal Reserve’s announcement of reduced bond-buying.
Rupee’s dip
The report also highlights that rupee’s performance weakened in the latter half of 2024 by almost 3 per cent. This dip was weighted down by capital outflows and strengthening US dollar, supported by Trump’s election victory in November.
Despite this drop, the rupee remained among the world’s most stable currencies.
“Till date, rupee has depreciated by ~3 per cent against US dollar, still in lowest echelon when compared with other countries,” the report stated.
The stability earlier in the first half of 2024 was attributed to capital inflows driven by the inclusion of Indian bonds in global bond indices, which cushioned the rupee against greater volatility.
Overall, the SBI report predicted that rupee will soon recover from the initial jolt of the Trump presidency, offering reassurance against prolonged instability.
