INR/CAD Outlook:
Bearish, as the INR is below its recent average and facing significant downward pressures.
Key drivers:
- Rate gap: The Reserve Bank of India's flexible policy contrasts with the Bank of Canada's cautious stance, contributing to a weaker INR against the CAD.
- Risk/commodities: Recent oil price volatility, with prices rising significantly, might support CAD as Canada is a major oil producer, putting further pressure on the INR.
- Macro factor: India's persistent current account deficit due to a widening trade gap is significantly impacting the INR’s value.
Range:
The INR/CAD rate is likely to drift within its recent range as lacking clear drivers means significant movement in either direction is unlikely.
What could change it:
- Upside risk: A significant recovery in manufacturing exports from India could bolster the INR.
- Downside risk: Continued weakness in global markets leading to further foreign portfolio investment outflows may weaken the INR further.