CAD/INR Outlook:
CAD/INR is likely to increase as the rate is currently trading 1.4% above its 3-month average and near recent highs, largely supported by strong oil prices.
Key drivers:
• Rate gap: The Bank of Canada maintains a higher policy rate compared to the more accommodative stance of the Reserve Bank of India, favoring CAD.
• Risk/commodities: Oil prices are at 90-day highs, boosting demand for CAD as Canada is a leading oil exporter.
• One macro factor: Canada's recent employment reports showed a significant increase in jobs, indicating robust economic health.
Range:
Expect CAD/INR to drift higher within its recent range, as it is at the upper limits of its movement.
What could change it:
• Upside risk: A sustained rally in oil prices could push CAD even higher.
• Downside risk: A contraction in Canada's GDP today could weaken the CAD, affecting its performance against INR.