CAD/INR Outlook: The CAD/INR exchange rate is slightly positive, holding above its recent average and near recent highs, supported by robust oil prices.
Key drivers:
• Rate gap: The Bank of Canada's recent rate cut positions it lower compared to the Reserve Bank of India’s policies, which may maintain pressure on the INR.
• Risk/commodities: Oil prices are currently at 90-day highs, benefiting the CAD as Canada is a major oil exporter.
• Trade policy impacts: India's trade deficit and capital outflows are putting downward pressure on the INR, making it more vulnerable.
Range: The CAD/INR is likely to drift within its recent range as support from oil prices may offset pressures on the CAD.
What could change it:
• Upside risk: A significant recovery in the Canadian job market might strengthen the CAD further.
• Downside risk: Increased trade tensions with the U.S. could exacerbate the INR's challenges and lead to depreciation.