Thanks to Donald Trump's victory, the Indian rupee is seen better placed as compared to other emerging market currencies. Given the Indian economy's comparative lack of vulnerability, the currency has outperformed this term. Madan Sabnavis, chief economist, CARE, said, "The rupee continues to be a better performing currency and is at or above the median level of change in a set of 17 currencies. We believe that the rupee will be driven more by fundamentals than an external US shock. US policies are more likely to affect countries like Mexico and China, which may be expected in the next six months."
Last week, the rupee recovered from the red to end marginally higher at 68.04 against the dollar, up from the day's low of 68.23 and marginally stronger than previous day's close of 68.08. Forex dealers said the increased demand for the dollar kept pressure on the rupee, but a higher opening in the domestic equity market helped the currency recover. Sabnavis said that if the currency movement during the fiscal is viewed separately for the period before US elections and after, the rupee has fared well in both. "It was at the median of 17 countries up to November, and was above the median level subsequently."
Half the currencies had declined by more than 5 per cent in the first period. The renminbi was also affected and fell by over 5 per cent up to November. However, it declined moderately by 0.72 per cent subsequently. The Mexican peso in particular will be affected the most as of now while the renminbi will be under pressure depending on the policy actions taken by the US with regards to Chinese trade and investment. A report by Nomura suggested that emerging markets are generally starting from a weak position to fend of 'Trumponomics'. It said that India is among the few emerging markets that could gain. "President Trump's warmer tone towards Russia has increased expectations that sanctions may be lifted or relaxed, but we do not expect it to happen this year. India too could benefit as President Trump seems to believe that a nuclear India is the real check to Pakistan," the report said.
