The CAD to INR exchange rate is currently at 62.62, representing a 1.4% decline from its three-month average of 63.48. The currency pair has exhibited stability within a narrow range of 62.54 to 64.19, indicating limited volatility recently. Significant factors influencing the Canadian dollar (CAD) stem mainly from fluctuations in oil prices, as Canada is a major oil exporter. The price of Brent Crude oil has recently dropped to 61.01, which is 8.6% below its three-month average of 66.73, with volatility recorded in a 20.4% range from 60.94 to 73.37. This decline in oil prices is likely contributing to the CAD’s current weakness against the Indian rupee (INR).
Analysts have pointed out the CAD's recent instability, associating it with fluctuating oil market conditions and the prevailing strength of the U.S. dollar. The Federal Reserve's hints at potential rate cuts have provided some support to the CAD against the U.S. dollar. However, market sentiment remains cautious as trade tensions with the U.S. and declining oil prices weigh down the currency.
In the Indian context, the Reserve Bank of India's proactive intervention by selling $3 billion to $5 billion in the foreign exchange market has stabilized the INR, marking its largest single-day gain in months. The intervention is a response to pressures stemming from rising gold imports and trade tensions due to increased U.S. tariffs on Indian exports. These tariff implications, combined with a stronger U.S. dollar, continue to exert downward pressure on the rupee. Market sentiment has shifted positively towards the INR following the RBI's intervention, suggesting increased demand for INR as indicated by recent options trading activity.
As the situation unfolds, the prospects for CAD against INR will be closely linked to oil price movements, the Bank of Canada’s monetary policy decisions, and evolving trade relationships, particularly with the U.S. The coming weeks will be critical, with both oil market trends and inflation data expected to influence the trajectories of these two currencies significantly.
