Why Donald Trump victory caused stock markets to boom but currencies to fall

Donald Trump’s victory in the US elections has many markets across the world soaring.

In America, both the Dow and S&P 500 scaled new heights.

In Asia, the Singapore’s Straits Times, Hong Kong’s Hang Seng, Taiwan’s Taiwan Weighted, Thailand’s SET Composite and China’s Shanghai Composite also witnessed a spike.

Meanwhile, a number of currencies fell in the aftermath of Trump’s victory.

But what happened? And why is this the case?

Let’s take a closer look:

What happened to stock markets?

As per CNN, the Dow increased by over 1,500 points to hit a new record high following the Trump win.

The blue-chip index previously rose over 1,000 points in a single day in November 2022.

The S&P 500 and Nasdaq, meanwhile, also surged – the former by 2.5 per cent and the latter by 2.95 per cent.

Asia-Pacific equity markets also traded higher on Thursday, buoyed by a record rise for US shares overnight.

German DAX futures added 0.36 per cent, following a 1.1 per cent slide on Wednesday. Pan-European STOXX 50 futures pointed 0.4 per cent higher, and Britain’s FTSE futures added 0.38 per cent.

Australia’s equity benchmark gained 0.3 per cent, while Taiwan’s benchmark (.TWII), climbed 0.8 per cent. South Korea’s Kospi (.KS11), closed slightly higher, snapping a two-day decline.

Chinese markets, which lost ground on Wednesday due to the likelihood of higher tariffs under another Trump presidency, rebounded in the latest session.

Hong Kong’s Hang Seng (.HSI), rose 1.5 per cent , while mainland blue chips (.CSI300), added 2.6 per cent.

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Why is this the case?

The US market, in particular, is happy that a clear picture of who won emerged.

“There’s clarity: We’re not going to see another January 6th event. The market is breathing a huge sigh of relief on that,” Michael Block, chief operating officer at AgentSmyth told CNN. “The mainstream consensus was that we weren’t going to know. And we know.”

Experts say that Trump’s victory is likely to usher in an era of deregulation.

“There is this huge perception of business friendly, tax-friendly regime coming into place, especially with them winning the Senate,” said Block.

“This was a market coiled for an extreme reaction one way or the other,” said Art Hogan, chief market strategist at B Riley Wealth Management. “The market is saying: We just elected a business-friendly president. … The initial reaction to a Trump administration is met with enthusiasm that may be temporary.”

Chris Weston, head of research at Pepperstone, said global investors may be rotating into US stocks from markets such as China and Europe to benefit from Trump’s pro-growth policies.

“As a Republican sweep of Congress becomes the base case for market participants, we see traders switching to a buy-everything-US-risk-related mindset,” he said.

“The USD was always the cleanest expression of a Trump presidency, and even more so a ‘red sweep’.”

However, not all stock markets were in a celebratory mood.

Though Japan’s broader Topix index (.TOPX) gained 1 per cent, its tech-heavy Nikkei 225 (.N225), posted losses.

The Sensex, which had risen 800 points early on Wednesday as the news of Trump’s victory began coming in, fell by over 800 points on Thursday – essentially washing out all of the previous day’s gains.

The Nifty, meanwhile, is at 24,206 – registering a drop of nearly 300 points.

In India, foreign investors have sold more than $1.5 billion of equities in November so far, adding to $11 billion of outflows in the previous month.

Experts say Indian investors should be watchful.

“The ‘Trump trade,’ which has sharply lifted US markets, is unlikely to have a similar positive impact on India, as Indian market valuations are high and there are headwinds from an earnings slowdown. Investors should focus on quality and value during this period of euphoria and uncertainty,” Dr VK Vijayakumar of Geojit told Economic Times.

“The Republican war cry of ‘Make America Great Again’ will likely lead to stronger US growth, which favours US markets over other emerging markets like India. EMs are even less likely to find favour with asset allocators, especially in light of likely worsening in global geopolitics and trade. FPI outflows from India may accelerate in the near term, given the dominance of passive inflows in FPI flows,” added Sanjeev Prasad of Kotak Institutional Equities.

What about currencies?

A number of currencies including the Indian rupee, Singapore’s dollar, Thailand’s baht, Mexico’s peso slumped in the aftermath of Trump’s win.

The Indian rupee declined to a lifetime low on Thursday in the wake of expectations that Donald Trump’s victory is likely to boost the dollar in the coming months.

The rupee dipped to 84.2950, inching past the previous all-time low of 84.28 hit on Wednesday.

Singapore’s dollar and Thailand’s baht slid the most among Asian currencies on Wednesday, while the Mexican peso hit a two-year low.

The Singapore dollar was last down 1.3 per cent at a three-month low and set for its worst session since August 2015.

Thailand’s baht slumped as much as 1.9pc to a two-month low, in its biggest one-day drop since February 2023.

Iran’s currency fell on Wednesday to an all-time low as Donald Trump clinched the US presidency again.

Why did this happen?

Analysts view Trump’s proposed tariff and immigration policies as inflationary, and are therefore likely to put upward pressure on prices, bond yields and the dollar, and undermine the currencies of trading partners.

Trump’s policies of tax cuts and deregulation are likely to lift U.S. growth, prompting investors to prefer the dollar to the other currencies, analysts said, adding that the threat of tariffs is likely to undermine euro and Asian currencies.

The Indian rupee is also under pressure from persistent outflows from Indian stocks.

The RBI intervention and India’s inflation differential with the rest of the world will determine the potential for further rupee depreciation, Citibank analysts said in a note.

Investors now await the US Federal Reserve’s policy decision due post-midnight IST.

The Fed is widely expected to cut rates by 25 basis points while investors will pay attention to Chair Powell’s commentary for cues on the future path of benchmark interest rates.

Ken Cheung Kin Tai, chief Asian foreign exchange strategist at Mizuho Bank, “Regional investors are particularly worried about the impact from tariffs because most Asian economies rely on trade growth.”

The Chinese yuan and Mexican peso are seen as the most vulnerable to a stronger dollar and heavier tariffs under Trump.

The yuan was last down 0.8 per cent, while the peso dropped as low as 20.7080 for the first time since August 2022.

MUFG analysts feel a Trump win would hit the South Korean won, Singapore dollar, Thai baht and Malaysian ringgit harder than other Asian currencies because of their export orientation and sensitivity to a potential slowdown in China’s growth.

The ringgit, Southeast Asia’s best-performing currency this year, was last down 1.5pc.

Malaysia’s central bank kept interest rate unchanged, as expected, and said it was monitoring the US election and was prepared to manage market volatility and ensure orderly market conditions.

The Indonesian rupiah fell 0.7pc to a nearly three-month low. The central bank governor said the short-term focus was on the rupiah’s stability amid the US election outcome.

An official said the central bank was also ready to stabilise the rupiah, including via steps such as intervention, if there was excessive volatility.

For Iran, this signals new challenges ahead s it remains locked in the wars raging in West Asia.

The slide comes as the rial already faces considerable woes over its sharp slide in value — and as the mood on the streets of Tehran among some darkened.

“One-hundred percent he will intensify the sanctions," said Amir Aghaeian, a 22-year-old student. “Things that are not in our favour will be worse. Our economy and social situation will surely get worse.”

He added: “I feel the country is going to blow up.”

In 2015, at the time of Iran’s nuclear deal with world powers, the rial was at 32,000 to $1. On July 30, the day that Iran’s reformist President Masoud Pezeshkian was sworn in and started his term, the rate was 584,000 to $1.

Trump unilaterally withdrew America from the accord in 2018, sparking years of tensions between the countries that persist today.With inputs from agencies

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