INR/AED Outlook: The outlook is slightly weaker, but likely to move sideways, as the rate is below its recent average and within the mid-range of recent trading.
Key drivers:
- Rate gap: The Reserve Bank of India is continuing its liquidity measures while the Central Bank of the UAE has a stable currency policy, creating a disparity in currency strength.
- Risk/commodities: Oil prices remain volatile, affecting both the Indian and UAE economies, but the Dirham is more stable due to its peg to the US dollar.
- One macro factor: The widening current account deficit in India, driven by increased gold imports and declining exports, is putting pressure on the INR.
Range: The INR/AED is likely to hold within its recent stable range, with fluctuations expected but no significant moves towards either extreme.
What could change it:
- Upside risk: A recovery in US-India trade relations could boost demand for the INR.
- Downside risk: Continued foreign portfolio investment outflows from India may further weaken the Rupee.
