The recent analysis of the CAD to INR exchange rate reflects a mixed outlook for the Canadian dollar, which is primarily influenced by oil prices and U.S. market dynamics. Currently, CAD is trading at approximately 63.11 INR, just below its three-month average, indicating relative stability despite fluctuations within a 2.6% range.
Analysts highlight that the Canadian dollar's strength is tightly correlated with oil prices, given Canada's status as a major oil exporter. Recently, oil has seen volatility, trading at around 65.16 USD, which is only 1.0% lower than its three-month average. This price stability in oil suggests that CAD could experience support if oil prices remain stable or increase, reflecting often positive revenues for the Canadian economy.
However, the latest forecasts indicate pressures on CAD owing to monetary policy shifts from the Bank of Canada. Following two rate cuts reducing the key interest rate to 2.25%, economic uncertainties and labor market weaknesses have prompted a cautious stance from the central bank. This policy shift aims to stimulate growth but also raises concerns over potential depreciation as lower interest rates typically discourage foreign investment.
On the INR side, the Indian rupee has faced significant challenges. The rupee recently hit a record low against the U.S. dollar, influenced by increased H-1B visa fees and subdued foreign inflows. The Reserve Bank of India's interventions to stabilize the currency through expanded dollar forward positions reflect ongoing pressures from strong importer dollar demand and a weakening trade balance.
Comparative analysis suggests that any potential upside for CAD may be limited unless oil prices improve, as low oil values could further weaken the exchange rate against INR. Furthermore, with the current economic climate appearing shaky for both the Canadian and Indian economies, experts advise that stakeholders in international transactions should remain vigilant to shifts in both U.S. and Canadian monetary policies and their broader economic implications.
In summary, CAD's trajectory will likely depend on oil market movements and Bank of Canada policy adjustments, while the INR is subject to domestic pressures, highlighting the complexities investors face in navigating these currencies in the current economic environment.
