INR/AUD Outlook:
Bearish, as the rate is below its recent average and near recent lows, pressured by ongoing economic challenges in India.
Key drivers:
• Rate gap: The Reserve Bank of Australia's recent interest rate hike has widened the policy rate differential, putting further pressure on the Indian Rupee (INR).
• Risk/commodities: Lower demand for commodities, particularly from China, has led to weaker performance from the INR due to its reliance on exports.
• Macro factor: India's persistent current account deficit continues to negatively affect investor confidence in the INR.
Range:
The INR/AUD is likely to drift within its recent range as the currency struggles with economic headwinds.
What could change it:
• An upside risk could arise if there are significant reforms or improvements in India's manufacturing exports.
• A downside risk might occur if geopolitical tensions escalate, further destabilizing the INR.