Will the new tantrum be bigger than the last one?

"New York: The Federal Reserve's term repurchase agreement (repo) operation on Friday morning received no bids out of a possible $500 billion for the first time since regular operations began last year," reported Reuters. "The Fed now offers up to $1 trillion in overnight repo support daily, along with several longer term operations, but dealers are taking only a fraction of the available cash." "The Fed's balance sheet surged to a record $5.3 trillion after growing by more than half a trillion in a week, according to data released Thursday." "A repurchase agreement (repo) is a form of short term borrowing for dealers in government securities." This is a means to provide short term liquidity by the Fed but it received no bids because of the amount of excess money in US markets. The Fed's balance sheet is the balance between its assets and liabilities. Theoretically, the Fed can buy any amount of assets by printing dollars. After the financial crisis of 2008, the Fed "embarked on a monetary experiment now widely known as 'quantitative easing' (QE): buying Treasury bonds and mortgage backed and US agency securities in the open market", expanding its balance sheet to $4.5 trillion. Now it has exceeded even that. It would be of no concern to us in India, except that we still have memories of the rupee plunging 3.7% to 69 to the dollar in August 2013, when the then Chair of the Fed Ben Bernanke hinted at reducing the balance sheet, setting off panic selling which came to be  known as the 'taper tantrum'. The Fed's actions resulted in a fall in the value of the dollar as investors stopped hoarding it. "The sell-off in the US dollar is a reaction to the liquidity measures announced by the Federal Reserve and other central banks," said Jane Foley, a currency strategist at Rabobank. "Fear may have subsided for now." Knowing there is no shortage of dollars investors stopped selling emerging markets. "As the new quarter starts Wednesday, repatriation funds will slow and the haven bid from a worsening global pandemic may fuel a resurgence in demand." The rupee has not benefited. "A massive rate cut that the Reserve Bank of India (RBI) announced on Friday now casts darker clouds over the domestic currency." The rupee has fallen to 76 to the dollar. "Meanwhile, domestic companies with unhedged dollar debts are in deep distress and there has been a clamor in recent weeks to buy covers." Just eight months back the Finance Minister Nirmala Sitharaman proposed sovereign borrowing in dollars to increase government spending in an effort to stimulate growth. Borrowing in rupees decreases liquidity in banks and pushes up interest rates. The fiscal deficit reached 135% of Budget prediction by February. Hope there is no repeat of the taper tantrum.