Trump loses, rupee gains: How US midterm elections triggered a turnaround in India's currency

The Indian rupee has staged a sharp recovery against the US dollar following the American midterm elections, supported by easing geopolitical tensions, falling crude oil prices and renewed foreign investment inflows. While US President Donald Trump's political setback coincided with the turnaround, analysts are watching whether favourable global conditions can sustain the currency's gains.

The rupee strengthened from ₹95.26 against the dollar on October 29 to around ₹93.85 on November 9, marking an appreciation of nearly 1.5% in less than two weeks. The recovery comes after months of pressure on the domestic currency, during which the Reserve Bank of India (RBI) intervened in foreign exchange markets to contain volatility.

How did Trump's midterm setback help the rupee?

The immediate shift in global sentiment followed the US midterm elections, which saw Trump's Republican Party suffer political setbacks.

Following the results, Trump reportedly ruled out fresh military strikes against Iran, easing fears of another escalation in West Asia.

The development helped calm energy markets, with Brent crude declining from above $105 per barrel before the election results to $96.41 on November 9.

For India, which depends heavily on imported crude oil, lower energy prices can reduce the import bill and demand for dollars, supporting the rupee.

However, the currency's recovery cannot be attributed solely to Trump's political setback. Foreign capital flows, global risk appetite and changing interest-rate expectations have also contributed.

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Foreign investors return to Indian markets

Another major factor behind the rupee's recovery has been renewed foreign portfolio investment.

Foreign investors reportedly pumped more than $4 billion into Indian equities during the previous week, increasing demand for the domestic currency.

Investors have also been reassessing exposure to expensive technology-heavy markets, including South Korea and Taiwan, while India's domestic growth prospects have attracted renewed attention.

The turnaround extended to government securities.

According to PTI, citing Clearing Corporation of India data, foreign portfolio investor holdings in government securities under the Fully Accessible Route (FAR) increased by approximately ₹7,969 crore between November 2 and November 9.

Holdings rose from ₹3.57 lakh crore to ₹3.65 lakh crore, reflecting renewed interest in Indian debt.

During the same period, the benchmark 10-year government bond yield declined from 7.315% to 7.178%, making existing bonds more valuable.

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RBI gets relief after months of currency pressure

The rupee's recovery has also provided breathing space for the RBI, which has been managing volatility through foreign exchange interventions.

While central bank measures helped stabilise the currency, falling crude prices and improving foreign inflows have provided additional support.

A stronger rupee can ease imported inflation, reduce costs for overseas education and foreign travel, and benefit companies dependent on imported raw materials.

However, exporters and IT companies earning revenues in dollars could face pressure on their rupee-denominated earnings.

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Can the rupee strengthen further?

Currency traders are watching the ₹93.50 level, with some market participants seeing scope for further appreciation towards ₹92.80 if foreign inflows continue and crude prices remain subdued.

However, upcoming US inflation data, Federal Reserve interest-rate decisions and geopolitical developments could reverse the trend.

Higher US interest rates could strengthen the dollar and put renewed pressure on emerging-market currencies.

For now, the rupee's recovery highlights how political developments thousands of miles away can influence India's currency, capital flows and inflation outlook.

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