The Canadian dollar (CAD) has recently experienced muted performance against the Indian rupee (INR), primarily influenced by the outlook on oil prices and domestic monetary policy. Analysts note that the CAD is closely tied to crude oil prices due to Canada's status as a significant oil exporter. Recent data indicates that oil prices have been volatile, currently trading at around 63.07 USD, approximately 3.2% below its three-month average of 65.18 USD. This ongoing softness in oil prices diminishes support for the CAD, which has seen its value fluctuate within a stable range of 62.54 to 64.19 against the INR.
Recent forecasts have indicated that further Bank of Canada rate cuts could weigh on the CAD. With key interest rates lowered to 2.25% as of late October due to concerns about the weakening job market and economic uncertainties, the CAD could face additional depreciation pressure, particularly if wage growth trends worsen. The latest wage data release could be pivotal, as slower growth might strengthen these concerns.
On the other hand, the INR is grappling with its challenges, including a record low against the USD and persistent pressure from importer demand for dollars. Reports highlighted that the Indian rupee reached a historic low of 88.62 against the USD in September, exacerbated by increased visa fees impacting foreign capital flows. The Reserve Bank of India has initiated measures to support the INR, including expanding its dollar forward positions, but ongoing difficulties in manufacturing exports and a narrowing interest rate differential with the US could limit its recovery.
Markets are currently observing the CAD/INR exchange rate, which stands at approximately 63.51—indicating a position near its recent average values. The consensus among forecasters suggests that any significant movements in oil prices will be closely watched, as they will likely dictate the trajectory of the CAD going forward. Furthermore, with the ongoing economic landscape marked by uncertainty, investors in both currencies are advised to remain vigilant regarding policy developments and macroeconomic indicators that could influence future exchange rate movements.
