CAD/INR is bullish-to-range-bound, positioned well above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Bank of Canada has recently cut its interest rate while the Reserve Bank of India is dealing with capital outflows, giving the CAD a potential advantage.
- Risk/commodities: Oil prices are currently higher than average, supporting the Canadian dollar as Canada is a major oil exporter.
- Trade deficit: India's notable trade deficit, exacerbated by U.S. tariffs, is putting pressure on the INR.
Range: The CAD/INR rate is likely to test the upper end of its recent range, supported by commodity price trends.
What could change it:
- Upside risk: A rebound in the Canadian labor market could strengthen the CAD further.
- Downside risk: Continued capital outflows from India might lead to a further weakening of the INR, impacting the exchange rate negatively.