Global markets, which had factored in a victory for Hilary Clinton, saw a sharp sell-off on Wednesday. The dollar index, which was recovering after the FBI cleared Clinton from her email investigation, took a strong beating. The index tumbled 2.2 per cent from 98.1 to make a low of 95.89, as Trump took a decisive lead over Clinton.
The Euro, Japanese Yen, British Pound and Swiss Franc all witnessed a strong rally against the greenback. The Yen gained the most on safe haven demand and rose over 4 per cent. The Franc and Euro strengthened about 3 per cent against the US dollar.
However, the party in the non-dollar currencies was shortlived and the dollar index regained strength after the official confirmation of Trump’s victory. The index has reversed sharply higher from the day’s low of 95.89 to 97.35 levels, wiping out most of its intra-day loss.
Technically, on the charts, the key trendline support at 96 has halted the fall and triggered this reversal. The dollar index may trade volatile between 96 and 98 for sometime. If the dollar loses sheen in the coming days to revisit 96 levels, then the Japanese Yen is likely to gain the most in such a scenario.
The Mexican Peso was the worst hit among all the currencies. The Peso plummeted 12 per cent on Wednesday to record an all-time-low of 20.78 against. The Korean Won fell 2.4 per cent during the day.
The Chinese Yuan was not affected much unlike the other emerging currencies.
Yuan unshakenThe currency lost just 0.3 per cent from its day’s high of 6.75 to and has closed at 6.77. The impact of the US election outcome on the Yuan will need a close watch in the coming days as Trump had proposed to label China as a currency manipulator.
The Indian rupee, however, has managed to stay insulated from the Trump effect in spite of a sharp sell-off in equity markets. The currency, which was threatening initially to break above the psychological 67 mark, gained ground after making an intraday low of 66.93.
The rupee strengthened to a high of 66.40 after Trump’s win and closed the day at 66.43. Trump has not made any explicit mention of trade policies with India. Data from the Commerce Ministry show that EU countries form a major pie of India’s exports — an average of 21.5 per cent, while US accounts for 13 per cent of total exports.
The near-term view for the rupee is positive. If it manages to break above 66.40, it can strengthen to 66 in the coming days. However, since a major portion of the $26 billion FCNR (B) redemption is due in November, the possibility of the rupee losing ground cannot be ruled out