SAR/INR Outlook:
The SAR/INR rate is slightly positive, trading just above its 90-day average and near recent highs. However, a clear driver is lacking, suggesting potential for sideways movement in the near term.
Key drivers:
• Rate gap: The Saudi Arabian central bank maintains a stable peg to the US dollar, while the Reserve Bank of India's recent flexible exchange rate policy allows more volatility for the INR.
• Risk/commodities: Recent fluctuations in crude oil prices impact India's trade deficit, which affects demand for the INR.
• One macro factor: The Comprehensive Trade Partnership with the US has boosted Indian exports, providing some support for the INR.
Range:
The SAR/INR is expected to drift within its recent range, holding steady around current levels while being influenced by external factors.
What could change it:
• Upside risk: A significant rise in global oil prices could increase demand for the SAR and affect the INR negatively.
• Downside risk: Further escalation of geopolitical tensions in the region could weaken the INR and lead to a decline against the SAR.