Jan 07 2026 12:00 AM EST

INR/CAD’s Three-Month Slide: When Rupee’s Wings Melt and Loonie Refuses to Drop

INR/CAD (FX Ticker: INRCAD) has lost 6.3% in the last three months—a sharp, almost poetic descent that leaves a trail of clues across global macro, trade friction, and central bank chessboards.

The Rupee’s Wings: Dollar Fever, Trade Deficits, and a Tapered Lifeline

The Indian rupee’s troubles began long before the latest quarterly swoon. In 2025, the rupee breached the 90-per-dollar mark, slipping by 6% for the year—its worst showing since the pandemic era. The Reserve Bank of India (RBI) scaled back dollar-selling interventions, allowing speculators and hedgers in the NDF market to push the rupee even lower. Foreign-exchange reserves fell from $700 bn to $693 bn in just twelve months—a subtle but significant erosion of India’s protective buffer.

Persistent current account deficits and relentless demand for crude oil imports have kept the rupee exposed. India’s merchandise trade deficit for November 2025 stood at $24.53 bn, while exports surged 19.37% year-over-year to hit $38.13 bn. Gold imports dropped nearly 60%, but oil and coal imports continued to weigh on the balance.

Tariffs, Turbulence, and the Loonie’s Parachute

Just as the rupee stumbled, the Canadian dollar found stability. U.S. tariff threats set off pre-emptive trade rushes in Canada, with exports to the U.S. surging 13.6% between November 2024 and January 2025. While the Canadian trade surplus narrowed from $13.8 bn in January to $8.4 bn in March, the Canadian dollar shrugged off volatility. The Bank of Canada’s cautious approach kept rates in a range that supported the currency, even as real GDP wobbled by -0.2% in February and rebounded a modest 0.1% in March.

Cross-border travel collapsed—auto trips fell 23% year-over-year in February and 31.9% in March—but Canada’s manufacturing and resource exports, still buoyed by U.S. demand, helped the loonie resist a free fall.

Central Bank Choreography: Repo Cuts and Policy Pivots

Monetary policy divergence was the hidden undertow. The RBI cut its key repo rate by 25 bp to 5.25% in December 2025, having already sliced rates by a cumulative 125 bp that year. Meanwhile, the Bank of Canada kept its policy rate steady, maintaining a defensive stance amid trade friction and softening employment in manufacturing.

The result? A widening interest-rate gap that favored the Canadian dollar, squeezing the INR/CAD pair. Real interest rates in India hovered around 1-1.5%, while Canada’s neutral policy helped anchor the loonie’s value.

Capital Flight: When Portfolio Money Runs for Cover

Foreign portfolio investors staged a dramatic exit from Indian equities, withdrawing ₹7,608 cr ($846 m) in the first two trading days of 2026. The record outflow for 2025—a staggering ₹1.66 lakh cr ($18.9 bn)—underscored global aversion to emerging-market risk, especially in the face of currency volatility and U.S. tariff uncertainty.

Seasonal January sell-offs are a ritual, but the magnitude this year was amplified by macro headwinds. Indian equities, once buoyed by 7.8% GDP growth in Q1 2025-26, now face valuation compression and a buyer’s strike. The rupee’s slide became self-reinforcing as portfolio flows dried up.

Commodities: The Price That Refused to Rise

The global commodity complex added a final twist. Between March and August 2025, primary commodity prices declined 2.6%, led by energy, base metals, and agriculture. India’s export basket, sensitive to commodity cycles, felt the pinch, while Canada—whose currency often dances to the rhythm of oil—saw less downside than expected thanks to U.S. demand and a quick trade pivot.

The commodity downdraft, combined with protectionist waves, meant that neither country could count on price tailwinds. Instead, both faced a world where trade wars and supply-chain snags dictated the FX scorecard.

The Macro Mosaic: When All the Pieces Tilt One Way

The INR/CAD currency pair’s -6.3% three-month retreat is no accident. It’s a symphony of rupee weakness, Canadian resilience, central bank divergence, capital outflows, and commodity headwinds. The spot rate as of January 7, 2026 hovers at C$0.0154, with forecasts suggesting a gradual INR rebound over the next 24 months—but only if trade friction eases and India’s policy pivots succeed.

In this market, currencies are not just numbers—they’re stories of macro ambition, policy intrigue, and the unpredictable choreography of global capital. For INR/CAD, the last three months have been a lesson in what happens when too many pieces tilt the wrong way, and the rupee’s wings melt just as the loonie refuses to drop.