SAR/INR Outlook:
Slightly positive, but likely to move sideways, as the rate is just above its recent average and trading near the mid-range.
Key drivers:
• Rate gap: The Saudi Arabian central bank maintains a firm peg to the U.S. dollar, while India's Reserve Bank's flexible exchange rate policy permits more fluctuation in the INR.
• Risk/commodities: Oil prices remain volatile, impacting the Indian Rupee negatively due to India's heavy reliance on crude imports, while supporting the Riyal.
• Foreign Portfolio Investment: Recent outflows from Indian equity and debt markets have put downward pressure on the INR, affecting its foreign exchange value.
Range:
Expect the SAR/INR to hold within its recent 3-month range as both currencies display stability.
What could change it:
• Upside risk: A significant increase in oil prices could boost the SAR, while stabilizing the INR could improve the exchange rate.
• Downside risk: Continued FPI outflows combined with worsening geopolitical tensions could negatively impact the INR further.