Recent developments in the currency markets indicate mixed prospects for the exchange rate between the UAE Dirham (AED) and the Chinese Yuan (CNY). As of November 2025, the AED traded at 90-day lows around 1.9263 against the CNY, marginally below its three-month average of 1.938. The stability of this exchange rate, oscillating within a narrow range of 0.9%, reflects ongoing underlying economic conditions.
Factors influencing the AED include the UAE's recent currency swap agreement with Turkey, valued at 18 billion AED, which aims to enhance local currency liquidity and financial transactions. This agreement signals a strengthening of regional cooperation, potentially boosting investor confidence. With the UAE Central Bank's interest rate cut of 0.25 percentage points in September, aimed at aligning with the U.S. Federal Reserve's policies, analysts note a positive response in local stock markets, demonstrating increased investor optimism.
On the other hand, favorable developments for the CNY are also noteworthy. Analysts forecast a strengthening of the yuan beyond the critical 7-yuan-per-dollar threshold in 2026. This optimism stems from narrowing interest rate differentials between China and the U.S., alongside a focus on enhancing the yuan’s internationalization. Moreover, the People's Bank of China is committed to stabilizing the yuan, which may cushion it from excessive fluctuations that could negatively affect its value.
While the AED has recently appreciated against various Asian currencies, the improving sentiment towards the CNY in response to China's economic policies could lead to a competitive environment for the AED. Furthermore, analysts caution that if the yuan continues to strengthen, the AED might face downward pressure against it.
Overall, businesses and individuals engaged in cross-border transactions should remain vigilant to these developments. The current exchange rate dynamics suggest a cautious approach, with the potential for further shifts as both currencies are influenced by their respective economic conditions.
