Desk : The whole world is paying attention to the American elections. The Reserve Bank of India has already made preparations for the possible results of the US elections. This doesn’t worry him at all. Whatever the result. Sources say that if Donald Trump wins and there is turmoil in the market, then the RBI will have huge foreign exchange reserves. With this the rupee can be kept stable. The RBI is also watching whether the new US government imposes new tariffs on China. This measure may increase inflation in India
The Indian rupee remains one of emerging markets’ best bets to recover from the volatility of a closely contested U.S. presidential election, backed by a central bank willing to defend the currency with the world’s fourth-largest reserves.
Traders have intensified their search for safe havens, analyzing the latest polling data ahead of Tuesday’s vote, which shows there is no clear leader between Kamala Harris and Donald Trump. Uncertainty has driven the cost of hedging against dollar fluctuations next week to its highest level since early 2020.
The Reserve Bank of India’s near-record foreign exchange reserves have helped maintain control over the rupee, making it less sensitive to fluctuations related to the US elections. According to MUFG Bank, given India’s domestic economy, unlike many of its competitors, the rupee is less sensitive to changes in US tariff policies.
“The RBI remains firmly entrenched in the market to curb currency volatility and foreign exchange reserves are more than adequate,” said Michael Wan, senior foreign exchange analyst at MUFG Bank. Furthermore, India’s “macro stability remains quite strong, with a manageable current account deficit of just over 1 percent of GDP and inflationary pressures gradually easing.
RBI Governor Shaktikanta Das has stressed the importance of creating foreign exchange reserves to protect the economy from instability. They have not hesitated to use batteries to avoid a sharp drop in the currency, especially around 84 per dollar.
The central bank sold $10.8 billion in the three weeks to Oct. 25 to protect the rupee, according to Bloomberg Economics calculations. The rupee hit a record low of 84.1087 on Monday amid continued pullbacks in the country’s stocks.
According to data compiled by Bloomberg, the weekly implied volatility between the dollar and the rupee stood at 3.5250 percent, while it was 20.3 percent for the dollar against the Korean won and 12.8 percent for the dollar against the rupee. Volatility of the Mexican peso, often seen as a bull market ahead of the US elections, has reached its highest level in four years.
