INR/HKD Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Reserve Bank of India's recent interventions and liquidity measures contrast with the Hong Kong Monetary Authority’s focus on maintaining the currency peg, influencing demand for both currencies.
• Risk/commodities: With oil prices slightly below average, the Indian economy may face additional pressure due to its reliance on energy imports, affecting the INR.
• One macro factor: The significant trade deficit in India could lead to sustained depreciation pressure on the INR, particularly in light of recent tariff hikes from the U.S.
Range: The INR/HKD rate is likely to hold steady within its recent 3-month range as it remains below average.
What could change it:
• Upside risk: A sudden increase in foreign portfolio investments could boost demand for the INR.
• Downside risk: Further widening of India's trade deficit could add downward pressure on the INR.
