Donald Trump’s return to the White House has caused ripples across global financial markets, with emerging market currencies bearing the brunt of investor anxiety. As fears of protectionist policies take hold, currencies such as the Chinese yuan, Indian rupee, and Brazilian real have faced sharp declines against the U.S. dollar.
Indian Rupee Hits Record Low
The Indian rupee, often considered a relatively stable currency among its emerging market peers, has seen significant pressure. After depreciating just 0.95% in the ten months leading up to November 5, the rupee slipped a further 0.73% within a month of Trump’s election victory, closing at an all-time low of ₹84.7/USD on December 2.
Analysts attribute this decline to fears of new U.S. tariffs under Trump’s administration, which could disrupt trade flows for economies reliant on exports, including India.
Yuan and Other Emerging Markets Feel the Heat
The Chinese yuan, which had shown resilience with a 0.6% gain against the dollar earlier in the year, has since lost 2.6% of its value post-election. This decline reflects heightened market concerns over Trump’s threats to impose import tariffs on Chinese goods.
Other emerging market currencies have fared worse. The Brazilian real saw the sharpest drop, plummeting 4.91%, followed by the South African rand, which declined 3.58%. The Indonesian rupiah also fell by 1.24% during the same period.
In contrast, the Vietnamese dong managed to limit its losses to just 0.3% since the election.
Trump’s Trade Threats Raise Global Tensions
Adding to the turbulence, Trump warned on his social media platform, Truth Social, that any move toward adopting a unified BRICS currency for international trade would be met with 100% tariffs on member countries. The former president has also reiterated plans to impose steep tariffs on China, Canada, and Mexico, raising fears of a potential trade war.
Long-Term Resilience of the Rupee
Despite the immediate post-election turmoil, the Indian rupee has demonstrated resilience when viewed over the course of 2024. It remains the best-performing currency among emerging markets, having depreciated by just 1.7% year-to-date. In comparison, the Indonesian rupiah fell 3.1%, the Vietnamese dong declined 4.4%, and the Chinese yuan slipped 2.1%.
The Brazilian real, however, has been the hardest hit, shedding a staggering 23.4% of its value since the start of the year, reflecting the country’s broader economic challenges.
Outlook
While the dollar index, which tracks the performance of the greenback against a basket of global currencies, has declined 2.5% since the U.S. election, the dominance of the dollar remains evident in emerging markets. With Trump’s administration poised to adopt protectionist trade measures, market volatility is expected to persist, particularly in export-dependent economies.
