AED/CNY Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and within the mid-range of the past three months.
Key drivers:
• Rate gap: The UAE’s Central Bank maintains a stable monetary policy compared to China's recent efforts to ease through rate cuts and stimulus measures.
• Risk/commodities: With current oil prices holding steady, the UAE Dirham's performance may stabilize as oil revenue supports the economy.
• One macro factor: China's proposals for currency alternatives through the BRICS nations could impact the broader international use of the yuan, affecting its relative strength.
Range: The AED/CNY is likely to hold steady within its recent range, given the lack of strong upward or downward momentum.
What could change it:
• Upside risk: An unexpected surge in oil prices could boost the UAE economy, strengthening the Dirham.
• Downside risk: Continued aggressive monetary easing by the People's Bank of China could further pressure the CNY, impacting the currency pair negatively.
