CAD/INR Outlook: Slightly positive, but likely to move sideways as the rate is above its recent average but lacks a significant driver to push it higher.
Key drivers:
• Rate gap: The Bank of Canada has maintained a steady policy rate while the Reserve Bank of India has implemented significant liquidity measures to stabilize the rupee.
• Risk/commodities: Oil prices are currently elevated, which generally supports the Canadian dollar since Canada is a leading oil exporter.
• Macro factor: Recent foreign portfolio investor outflows from India have contributed to depreciation pressure on the rupee.
Range: The CAD/INR pair is likely to hold within its recent range, though volatility may persist.
What could change it:
• Upside risk: A rise in oil prices could further strengthen the CAD.
• Downside risk: Increased geopolitical tensions or further significant FPI outflows could pressure the INR, negatively impacting the CAD/INR rate.