Bias: Bearish-to-range-bound, given the INR is below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Reserve Bank of India has been active in stabilizing the rupee, while the Bank of Thailand is cutting interest rates to support its economy.
- Risk/commodities: Oil prices are currently above average, which could impact the INR negatively due to its reliance on oil imports, while also creating mixed pressure on the THB.
- One macro factor: India's significant trade deficit and capital outflows are continuing to weigh heavily on the rupee’s strength.
Range: The INR/THB pair is likely to drift within its recent range, which could see continued volatility without clear direction.
What could change it:
- Upside risk: A resolution in U.S.-India trade negotiations could support the rupee's recovery.
- Downside risk: Continued pressure from capital outflows and ongoing trade challenges could push the rupee weaker against the baht.