INR/CAD Outlook:
The INR/CAD exchange rate is likely to decrease, trading significantly below its recent average and nearing recent lows. Recent geopolitical tensions and fluctuating oil prices are both weighing on the INR and CAD.
Key drivers:
• Rate gap: The Reserve Bank of India has adopted a flexible exchange rate policy while the Bank of Canada maintains a stable interest rate, bolstering the CAD.
• Risk/commodities: With oil prices currently at 90-day highs, the CAD may come under pressure if oil demand shifts, affecting the trade balance.
• One macro factor: India's increasing pharmaceutical and tech exports to the U.S. have recently strengthened the INR, but geopolitical tensions persist.
Range:
The INR/CAD is expected to drift downwards within its recent range.
What could change it:
• Upside risk: A significant reduction in geopolitical tensions could boost the INR.
• Downside risk: A contraction in Canada’s GDP could further pressure the CAD.
