INR/AUD Outlook:
Slightly weaker, but likely to move sideways, as the rate remains below its recent average and lacks a strong driving factor.
Key drivers:
• Rate gap: The Reserve Bank of Australia has recently hiked rates, strengthening the AUD compared to the Bank of India's steady approach amid ongoing challenges.
• Risk/commodities: The AUD benefits from rising commodity prices, as demand for Australian exports remains strong.
• Macro factor: India's persistent current account deficit continues to impact the INR's stability, creating pressure on its value.
Range:
Expect the INR/AUD to hold within its recent 3-month range, as both currencies respond to respective economic pressures but without clear direction.
What could change it:
• Upside risk: A sudden improvement in India's trade balance or manufacturing exports could bolster the INR.
• Downside risk: Continued capital outflows from Indian markets could add further depreciation pressures on the INR.