Understanding the 'Trump Tantrum' Effect on the Indian Rupee

As US President-elect Donald Trump prepares for his second term, the Indian rupee is expected to face temporary turbulence. This phenomenon, termed the 'Trump Tantrum' by the State Bank of India (SBI), highlights the rupee's sensitivity to Trump's presidency. However, the SBI report reassures that this impact will be short-lived, with the rupee likely to stabilize soon after the initial shock.

Historical Trends: Rupee's Performance Under Republican vs. Democratic Regimes

Contrary to popular belief, the rupee has historically shown greater stability under Republican administrations compared to Democratic ones. The SBI report suggests that the rupee might be more vulnerable under a non-Trump or Democratic regime, based on trends observed since the Nixon era.

Predictions and Current State of the Rupee

Analysts predict that the current volatility will not reach the levels of the 2013 'Taper Tantrum'. Despite a 3% dip in the latter half of 2024, influenced by capital outflows and a strengthening US dollar, the rupee remains among the world's most stable currencies. The inclusion of Indian bonds in global bond indices earlier in 2024 provided a cushion against greater volatility.

Looking Ahead

The SBI report concludes with an optimistic outlook, predicting the rupee's recovery from the initial jolt of Trump's presidency. This offers reassurance against prolonged instability, highlighting the resilience of the Indian currency in the face of global political shifts.