INR/AED Outlook:
Slightly weaker, but likely to move sideways, as the rate is below its recent average and shows mixed signals from current drivers.
Key drivers:
• Rate gap: The policy rate gap between India and the U.S. is narrowing, which is affecting foreign investment and the INR's value.
• Risk/commodities: Recent declines in oil prices could impact the UAE's revenues, indirectly affecting the Dirham through its pegged exchange rate.
• Weak manufacturing exports: Sluggish growth in India’s manufacturing sector is contributing to ongoing pressure on the Rupee.
Range:
The INR/AED is likely to drift within its recent range, having been stable and only slightly below average.
What could change it:
• Upside risk: A rebound in global oil prices could bolster the UAE's reserves, benefiting the Dirham and indirectly supporting the INR.
• Downside risk: Continued FPI outflows from India could further weaken the INR, maintaining pressure against the AED.
