HKD/INR Outlook: Slightly positive, but likely to move sideways, as the rate is above its recent average and lacks a clear driving force.
Key drivers:
• Rate gap: HKD is being supported by the Hong Kong Monetary Authority's actions to defend its peg to the US dollar, while the Indian Rupee faces pressure from both trade tariffs and foreign portfolio investment outflows.
• Risk/commodities: The recent trend in oil prices has been volatile, which may affect the INR indirectly, given India's large oil import needs.
• One macro factor: The widening trade deficit in India has increased pressures on the INR, limiting its strength against the HKD.
Range: The HKD/INR rate is expected to hold steady within its recent range, with little volatility anticipated.
What could change it:
• Upside risk: A significant inflow of foreign investment into Hong Kong could strengthen the HKD.
• Downside risk: Further deterioration in India’s trade relations with the US could lead to increased selling pressure on the INR.