INR/AED Outlook:
Slightly weaker, but likely to move sideways, as the rate is below its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Reserve Bank of India's recent interventions contrast with the stable policy of the UAE Central Bank, contributing to uncertainty for the INR.
• Risk/commodities: With oil prices under pressure, the impact on India’s trade deficit may further depreciate the INR due to heavy crude imports.
• One macro factor: The ongoing current account deficit in India, driven by weak manufacturing exports, continues to apply downward pressure on the INR.
Range:
The INR/AED movement is expected to hold steady within the recent range, without significant breakout signals.
What could change it:
• Upside risk: A surge in foreign investment in India could strengthen the INR.
• Downside risk: Further geopolitical tensions might lead to increased capital outflows, worsening INR depreciation.
