INR/CAD Outlook:
Bearish, as the INR continues to trade below its recent average and near recent lows, pressured by various domestic challenges.
Key drivers:
• Rate gap: The Reserve Bank of India's flexible exchange rate policy contrasts with the cautious approach of the Bank of Canada, which maintains its rate.
• Risk/commodities: Although oil prices are rising, they remain below average with high volatility, which reinforces pressure on the INR while benefiting the CAD.
• Weak manufacturing exports: Slower growth in India's manufacturing sector amid global demand challenges is straining the rupee.
Range:
The INR/CAD is expected to drift within the recent range but could test lower extremes due to persistent pressures.
What could change it:
• Upside risk: A significant improvement in Indian exports or a stronger foreign investment inflow could bolster the INR.
• Downside risk: Continued geopolitical tensions or further deterioration in trade relations could lead to additional losses for the INR.
