AED/AUD Outlook:
Slightly weaker, but likely to move sideways due to the rate being below its recent average and the lack of a clear driver.
Key drivers:
• Rate gap: The UAE Dirham is stable as it remains pegged to the US Dollar, while the Australian Dollar is benefiting from a recent interest rate hike by its central bank aimed at curbing inflation.
• Risk/commodities: Australian dollar strength is supported by the rise in commodity demand, particularly as China's economic policy fosters higher imports of Australian resources.
• Economic developments: The recent jump in Australia's consumer price index raises expectations for ongoing monetary policy tightening, enhancing the AUD's appeal.
Range:
The AED/AUD is likely to drift within its recent 3-month range, facing challenges to move towards its upper limits.
What could change it:
• Upside risk: A significant increase in global oil prices could improve the Dirham's foreign reserves, strengthening its relative position.
• Downside risk: A decrease in commodity demand could pressure the AUD lower, widening the gap with the Dirham.
