INR/AUD Outlook:
The INR/AUD pair is slightly weaker but likely to move sideways as it is below its recent average while lacking a clear driver. The Indian Rupee is trading significantly below its three-month average, indicating ongoing downward pressure.
Key drivers:
• Rate gap: The Reserve Bank of India's shift to a flexible exchange rate policy contrasts with the Reserve Bank of Australia's potential for monetary tightening due to sticky inflation.
• Risk/commodities: Weakening risk appetite and global uncertainties have diminished demand for the INR, while the robust performance of commodities is supporting the AUD.
• One macro factor: The recent surge in Indian pharmaceutical exports to the US following a trade agreement could provide some support for the INR.
Range:
The INR is likely to hold within its recent trading range, experiencing mild fluctuations without significant momentum in either direction.
What could change it:
• Upside risk: A sudden improvement in geopolitical tensions could boost the INR.
• Downside risk: Continued capital outflows from India or weakening commodity prices could further depress the INR.
