The Canadian dollar (CAD) has been under pressure recently, primarily due to declining oil prices and a series of interest rate cuts by the Bank of Canada. Analysts note that the loonie's movements have been influenced by the volatility in oil prices, with the latest data showing oil trading at $63.34, which is 2.8% lower than its 3-month average. This decline in oil prices, coupled with Canada's reliance on oil exports, typically leads to a depreciation of the CAD, which has been observed in its weaker performance against stronger currencies.
Recent economic indicators from Canada also point towards potential further softening of the CAD. Wage growth data released suggested a slowdown in average earnings for September, which may impact consumer spending and overall economic growth. The Bank of Canada recently slashed its key interest rates to 2.25%, signaling concerns over the economic landscape and increasing the likelihood of further rate cuts if the situation does not improve. These developments are critical as lower interest rates tend to deter foreign investment, weakening the CAD further.
On the other hand, the Indian rupee (INR) has also faced challenges, hitting a historic low against the US dollar. The rupee's depreciation is attributed to reduced foreign equity inflows and higher US visa fees, alongside persistent demands for dollar hedging from importers. The Reserve Bank of India's interventions, including expanding its dollar forward positions, indicate active measures to stabilize the INR amidst this turbulence.
Currently, the CAD to INR exchange rate is at a 30-day high near 63.71, slightly above its 3-month average. The stability in this exchange rate, which has traded within a narrow 2.6% range, reflects the balance of the current pressures on both currencies. Given the ongoing uncertainties in both Canada and India, particularly surrounding economic conditions and market sentiment, both currencies are poised for fluctuations in response to further developments in the oil market and monetary policies. Markets will be closely monitoring these factors to gauge future movements in the CAD/INR exchange rate.
