AED/INR Outlook: Slightly positive, but likely to move sideways, as the rate is above its recent average and lacks a clear driving factor.
Key drivers:
• Rate gap: The UAE's central bank policies indicate stability, while India faces pressures from liquidity measures and trade deficits.
• Risk/commodities: In recent weeks, the price of Brent Crude oil has stabilized above average levels, supporting the UAE Dirham and making the UAE economy more resilient.
• One macro factor: India's widening trade deficit and outflows of foreign investment have put downward pressure on the Rupee recently.
Range: The AED/INR pair is likely to drift within its recent range, with no significant catalysts pushing it towards the upper or lower extremes.
What could change it:
• Upside risk: An improvement in US-India trade relations could increase demand for the Rupee.
• Downside risk: Continued foreign capital outflows from India may further weaken the Rupee’s value.
