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The "Trump Tantrum," a term used to describe the effects of Donald Trump's presidency on the Indian rupee, is expected to be a transient phenomenon, according to a State Bank of India (SBI) report. Despite fluctuations in the rupee since Trump's presidential victory in November 2024, the report suggests that the currency will stabilize in the coming months.
The report attributes the rupee’s initial decline to capital flight and the strengthening of the US dollar following Trump's election. Since November 2024, the rupee has depreciated by approximately three per cent against the US dollar. However, SBI noted that "the rupee has depreciated by 3 per cent against the US dollar, still in the lowest echelon when compared with other countries," emphasizing its relative stability compared to other global currencies.
According to the SBI report, historical trends indicate that the rupee has performed better under Republican administrations than Democratic ones. The analysis noted, "Contrary to market perceptions, the rupee appears more vulnerable under a non-Trump or Democratic regime." The research anticipates that this historical trend of relative rupee stability will continue during Trump's presidency, as it has during previous Republican administrations dating back to the Nixon era.
While acknowledging potential short-term volatility, the report asserts that current market conditions are not comparable to the disruptions of the 2013 "Taper Tantrum." It credits stable foreign exchange markets in the first half of 2024 and increased capital inflows, particularly from the inclusion of Indian bonds in international bond indices, for the rupee’s resilience.
SBI analysts predict that as markets adapt to the Trump administration, the rupee will regain stability, alleviating concerns of prolonged volatility. They emphasize that a combination of favourable domestic and international factors will help the currency return to equilibrium.
The report concludes that despite its recent depreciation, the Indian rupee remains one of the world’s more stable currencies, underscoring its strength amid changing global economic dynamics.
Also Read: Rupee Gains 8 Paise To Recover From All Time Low Against US Dollar