Rupee recovers sharply after Donald Trump win

The Indian rupee had a highly volatile session on Wednesday, falling rapidly in the morning but strengthening sharply by the close after Donald Trump was elected as the 45th president of the United States. 

The volume was relatively thin as banks were shut for the customers. The Reserve Bank of India (RBI) was not present in the market, neither selling at the time of sharp depreciation nor buying when rupee strengthened. 

The government’s move to de-recognise high-value notes also stokes uncertainties in the morning as the local equity index tumbled more than 1600 points.  By the end of the day, the BSE Sensex recovered to close at only 300 points down. 

The rupee largely mirrored the stock index as it opened at 66.80 a dollar level from its previous close of 66.62 a dollar. But it closed at 66.43 by the end of the day as equity markets recovered 700 points. In the morning trade, rupee had fallen to 66.92 a dollar level. 

Even as the volume in the currencies market was less, the dealing rooms of banks were buzzing with activity. 

“The bond and currency markets are now following the same cues. The acceptance speech of Trump showed him as a moderate personality. Dollar index fell and now there is a feeling that the US Fed could be pushing the interest rate decisions down the line for sometime,” said Harihar Krishnamurthy, head of treasury at First Rand Bank. 

Besides, the steps taken on black money would ensure that the banking sector liquidity will increase, which is good for bonds. If deposits increase, there could be a chance of rate cut too, said Krishnamurthy. 

The dollar index, which fell 1.83 per cent in the morning, recovered after the election results were announced. 

The 7.59 per cent 10 year bond closed at 6.7543 per cent from its previous close of 6.798 per cent.