Rupee is at its lowest point ever, and the dollar may rise on Trump's return

On Wednesday, the dollar strengthened amid the probability of Donald Trump returning to the White House. The Indian rupee reached an all-time low of 84.25 against the US dollar as a result. The market is now expecting increased government expenditure under the Trump administration as a result of the most recent election results, which might cause the US fiscal deficit to increase. Trump's proposals, which prioritise domestic infrastructure, are expected to raise borrowing requirements and budgetary restrictions, according to investors. The dollar has already risen to July levels as a result of this scenario.

As a result, the Indian rupee slipped to a record low of 84.25 against the dollar, though it later recovered slightly and was trading at 84.18 at the time of filing this report. Experts say such policies could widen the US fiscal deficit, potentially leading to more borrowing by the government. The Mexican peso has already fallen 3% against the dollar, while the Japanese yen and euro have also weakened. Higher Treasury yields not only add to the dollar strength but also put pressure on global currencies, especially emerging markets like India. Banking and market expert Ajay Bagga told ANI, "Trump trades are going on in the market. With Trump's win in North Carolina, his chances of winning 270 electoral college votes have increased. Trump's policies will lead to a rise in the US fiscal deficit, US Treasury yields will rise and as a result we are seeing the US dollar rising to July levels. Mexican peso has fallen by 3%, Yen, Euro both have fallen. This is a Trump trade as markets are seeing a high probability of Trump's victory."

This was reflected in the gradual decline of the rupee against a strong dollar in India, echoing the tough environment for emerging markets. The consensus is that the weak currency is based on a cocktail of external pressures: the tightening of US monetary policy and global market volatility. Although the Reserve Bank of India has been taking steps it deems necessary to intervene in the forex market with the intention of stabilizing the rupee in the past, it may have to take action if the dollar is allowed to strengthen further without any restriction.