Bias: The outlook for SGD/INR is bullish-to-range-bound, as the pair is trading above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Monetary Authority of Singapore has shifted to a more accommodative monetary policy, while the Reserve Bank of India continues to actively intervene in the forex market, aiming to stabilize the rupee.
- Risk/commodities: Oil prices are moderately stable, which supports the SGD due to Singapore's economic focus on trade and stability; this creates pressure on the INR, particularly given India’s substantial trade deficit.
- Macro factor: The ongoing trade tensions and capital outflows from India add to the rupee's vulnerability and might impact its future strength.
Range: The SGD/INR pair is likely to hold within the current bounds, but a drift toward the upper end of its recent range is possible given the current bullish momentum.
What could change it:
- Upside risk: A significant improvement in trade negotiations with the U.S. could strengthen the INR and narrow the rate gap.
- Downside risk: Continued capital outflows and persistent trade deficits could exert further downward pressure on the rupee.
