14 January,2025 12:27 PM IST | New Delhi | mid-day online correspondent
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A report from the State Bank of India (SBI) suggests that the "Trump Tantrum," which describes the effects of Donald Trump's presidency on the Indian rupee, is anticipated to be a short-term phenomenon, reported news agency ANI.
The analysis points out that while the rupee might experience some initial fluctuations in the early days of Trump's presidency, it will likely stabilise shortly thereafter.
"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," ANI stated citing the report.
Historical data referenced in the report shows that the Indian rupee tends to perform better during Republican presidencies compared to Democratic ones.
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"Contrary to market perceptions, the rupee appears more vulnerable under a non-Trump or Democratic regime," the report adds.
Reviewing historical U.S. presidencies since the Nixon era, the rupee has generally shown more stability during Republican terms.
While some volatility can be anticipated in the near term, the present circumstances do not parallel the severe fluctuations witnessed during the "Taper Tantrum" of 2013. This has led analysts to believe that the rupee's reaction to the Trump presidency will be temporary, ANI stated.
The report also noted that the rupee began to weaken in the second half of 2024 due to capital outflows. The strengthening of the U.S. dollar, triggered by Donald Trump's presidential victory in November, further contributed to the rupee's decline.
Since November 2024, the rupee has seen a depreciation of about 3 per cent against the U.S. dollar. Nevertheless, its performance is among the most stable when compared to other global currencies.
"Till date, rupee has depreciated by ~3 per cent against US dollar, still in lowest echelon when compared with other countries," it remarked.
The report also emphasised that during the first half of 2024, India's foreign exchange market remained steady, bolstered by capital inflows from the inclusion of Indian bonds in global bond indices. This development has helped mitigate more significant volatility in the rupee's value.
Overall, the report forecasts that the rupee will adjust to the initial impacts of Trump's presidency and stabilise in the upcoming months, alleviating fears of prolonged instability.
(With inputs from ANI)
