INR/CNY Outlook:
Bearish, given that the rate is below its recent average and near the lower end of its range.
Key drivers:
• Rate gap: The Reserve Bank of India has maintained its rates while the People's Bank of China has recently cut interest rates to stimulate the economy, widening the gap favoring the CNY.
• Risk/commodities: Persistent crude oil prices, remaining elevated, continue to weigh on the INR as India depends heavily on oil imports.
• One macro factor: Persistent FPI outflows from Indian markets reflect global risk aversion, impacting the INR as investors look to safer assets.
Range:
The INR/CNY is likely to drift within its recent range, unable to test higher levels due to current pressures.
What could change it:
• Upside risk: A notable improvement in India's trade balance could stabilize the INR and boost confidence.
• Downside risk: Continued deterioration in global economic conditions could accelerate FPI outflows, further depressing the INR.
