AED/AUD Outlook:
Bearish, with the rate trading below its recent average and near recent lows, reflecting pressure from the Australian rate hike.
Key drivers:
• Rate gap: The Reserve Bank of Australia has raised interest rates to strengthen the AUD, while the UAE Dirham's stability is maintained by its fixed peg to the US dollar.
• Risk/commodities: Global oil prices remain volatile, directly impacting the UAE's foreign reserves and hence the Dirham's stability.
• One macro factor: Australia's recent inflation surge has set expectations for further tightening, providing additional support for the AUD.
Range:
Expect the AED/AUD pair to drift within the recent trading range, given its current position near the lower end.
What could change it:
• Upside risk: A sharper than expected increase in oil prices could enhance the Dirham's stability.
• Downside risk: Any indication of a reversal in Australian interest rate policy could weaken the AUD further.