CAD/INR Outlook: Likely to increase, as the exchange rate is above its recent average and near recent highs, primarily driven by commodity trends.
Key drivers:
• Rate gap: The Bank of Canada has recently lowered interest rates, while the Reserve Bank of India faces ongoing pressures from capital outflows.
• Risk/commodities: Oil prices are currently above their recent average, benefiting the Canadian Dollar due to Canada's significant oil exports.
• One macro factor: India's trade deficit has surged, driven by tariffs affecting exports, which adds downward pressure on the Indian Rupee.
Range: Expect CAD/INR to drift within its recent range, potentially testing upper limits as support from oil prices persists.
What could change it:
• Upside risk: A significant increase in oil prices could further strengthen the CAD.
• Downside risk: Renewed capital inflows into India or progress in U.S.-India trade talks could strengthen the INR against the CAD.