Bias: The outlook for INR/SGD is bearish-to-range-bound as it currently sits below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Reserve Bank of India maintains a firmer strategy compared to the more accommodative stance of the Monetary Authority of Singapore, which is impacting the relative strength of the rupee against the Singapore dollar.
- Risk/commodities: Oil prices have been volatile, currently below average, creating additional stress on the Indian economy, which is heavily reliant on oil imports.
- Macro factor: India's escalating trade deficit, significantly affected by U.S. tariffs on exports, is putting pressure on the rupee and adding to uncertainties in the currency market.
Range: Expect the INR/SGD to drift within the recent range, facing difficulty in breaking through the upper thresholds.
What could change it:
- Upside risk: Progress in U.S.-India trade negotiations could provide strength to the rupee.
- Downside risk: Continued capital outflows and worsening trade deficits could lead to further declines in the rupee's value.