Donald Trump's Win In The US Elections Weighs Down Rupee, Currency Hits All-Time Low

Traders noted that state banks were seen providing dollars through Friday, on behalf of the Reserve Bank of India, and this helped limit the currency’s losses

The Indian Rupee suffered a major blow this week in the aftermath of Donald Trump winning the US Presidential Elections. On Friday, the domestic currency slipped to a record low and clocked the worst weekly fall seen since May. 

This weakening was triggered by consistent outflows from local stocks and anticipations of a robust dollar after Trump’s win, reported Reuters. The domestic currency ended at 84.3750 against the greenback, after declining to 84.38 late in the session.

The rupee hit an earlier all-time low of 84.3775 on Thursday. Traders noted that state banks were seen providing dollars through Friday, on behalf of the Reserve Bank of India, and this helped limit the currency’s losses.

Overseas investors have so far withdrawn more than $1.5 billion from Indian equities in November, while the outflows stood at $11 million in October. The NSE benchmark Nifty50 also fell 8.1 per cent from its record high seen in late-September.

Earlier this week on Wednesday also, the domestic unit depreciated 21 paise to reach 84.30 against its American counterpart. Trump securing his win and becoming the President of the United States helped provide a boost to the dollar and US bond yields. This, in turn, severely impacted most emerging market currencies.

The dollar index soared to hit a four-month peak mid-week, however, later pared gains. Abhilash Koikkara, Head of Forex and Rates, Nuvama Professional Clients Group, noted, “The RBI may defend 84.50 in the near term, but the rupee is expected to continue declining gradually given expectations of dollar strength.”

However, the rupee's fall was cushioned by a softening seen in the US dollar index. This followed the US Federal Reserve announcing a cut in the key interest rates by 25 basis points. US Fed chair Jerome Powell said that the economy remained strong and some downside risks seem to have diminished. Notably, the Fed slahsed the benchmark rate to a target range of 4.5-4.75 per cent.