CAD/INR Outlook:
The CAD/INR exchange rate is slightly positive but likely to move sideways as it currently trades above its recent average. However, there is no clear driver supporting a significant upward move.
Key drivers:
• Rate gap: The Bank of Canada's cautious stance contrasts with the RBI’s flexible policy, affecting how both currencies react to market changes.
• Risk/commodities: Rising oil prices, currently above average, support the CAD since Canada relies on oil exports for economic strength.
• One macro factor: The recent US-India trade agreement has boosted the INR, particularly in pharmaceuticals and technology services, enhancing its value.
Range:
Expect CAD/INR to hold within its recent 3-month range, showing stability without significant movement in either direction.
What could change it:
• Upside risk: A substantial increase in global oil prices could further strengthen the CAD.
• Downside risk: Escalating geopolitical tensions in South Asia might increase demand for the US Dollar, applying downward pressure on the INR.
