INR/CAD Outlook:
The INR/CAD rate is currently below its recent average and has recently hit a 7-day high, indicating a slight recovery. However, the overall trend shows it is likely to move sideways due to mixed signals from both currencies.
Key drivers:
• Rate gap: The Reserve Bank of India’s flexible exchange rate policy allows for gradual depreciation, putting pressure on the INR against the CAD.
• Risk/commodities: Oil prices are significantly higher than their average, which typically strengthens the CAD, benefiting from increased Canadian oil revenues.
• One macro factor: Escalating trade tensions with the U.S. are adding pressure on the CAD, potentially limiting its strength despite rising oil prices.
Range:
Expect the INR/CAD to drift within its recent 3-month range amid mixed market signals.
What could change it:
• Upside risk: A significant rise in Canadian retail sales could bolster the CAD further.
• Downside risk: Continued geopolitical tensions may increase demand for safe-haven currencies, negatively impacting the INR.