Trump Tantrum: Impact of new US presidency on Indian Rupee likely to be short-lived, says SBI Report

The “Trump Tantrum”, referring to the impact of Donald Trump's presidency on the Indian rupee, is likely to be a short-term phenomenon, says a report by State Bank of India (SBI).

The report highlighted that while the rupee may face initial volatility during the early days of his presidency, it is expected to stabilize soon after.

‘Empirical Data Suggests Short-Term Impact’

It said “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”.

According to the report, historical data indicated that the Indian rupee has generally performed better under Republican administrations compared to Democratic ones.

“Contrary to market perceptions, the rupee appears more vulnerable under a non-Trump or Democratic regime,” the report stated.

Historically, Rupee Fares Better With Republicans

Looking back at past U.S. presidencies, particularly since the Nixon era, the rupee has been relatively stable during Republican tenures.

While some volatility is expected in the near term, the current situation does not mirror the levels seen during the infamous "Taper Tantrum" of 2013. This has led analysts to believe that the rupee's reaction to the Trump presidency will be temporary.

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.

Currency Status — Indian Rupee Down

Since November 2024, the rupee has depreciated by approximately 3 per cent against the U.S. dollar. Despite this, the rupee's performance remains among the most stable when compared to other global currencies.

It said "Till date, rupee has depreciated by ~3 per cent against US dollar, still in lowest echelon when compared with other countries".

The report further highlighted that during the first half of 2024, the domestic foreign exchange market remained steady, supported by capital inflows driven by the inclusion of Indian bonds in global bond indices. This helped cushion the rupee against greater volatility.

Overall, the report predicted that the rupee will adjust to the initial shock of the Trump presidency and stabilize in the coming months, easing concerns about prolonged instability.

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