CAD/INR Outlook:
Bullish, as the rate is significantly above its recent average and trading near recent highs, supported by oil price dynamics.
Key drivers:
• Rate gap: The Bank of Canada has adopted a cautious monetary policy, while the Indian central bank deals with a widening current account deficit, creating a supporting rate gap for CAD.
• Risk/commodities: Rising oil prices, now well above average, bolster the commodity-linked CAD, as Canada benefits from increased oil revenue.
• Macro factor: India's weakening manufacturing export growth amid global demand challenges continues to apply downward pressure on the INR.
Range:
Expect CAD/INR to hold strong within the recent range, with potential for deeper testing of the upper extremes.
What could change it:
• Upside risk: A sustained rise in oil prices could further enhance the value of the CAD.
• Downside risk: A shift towards tighter fiscal policies in India or significant geopolitical tensions could weaken the INR further.