AED/INR Outlook:
Slightly positive, but likely to move sideways due to its position above the recent average and lack of a clear driver.
Key drivers:
• Rate gap: The UAE Dirham’s peg to the US Dollar provides stability, while the Indian Rupee struggles due to persistent current account deficits.
• Risk/commodities: Recent movements in global oil prices affect the UAE's foreign reserves, which are essential for maintaining the Dirham's peg, thereby influencing its value against the INR.
• One macro factor: The Reserve Bank of India's flexible intervention strategy adds complexity to the Rupee's performance, impacting its stability against the Dirham.
Range:
Expect the AED/INR to hold within its recent range, showing slight fluctuations but remaining stable overall.
What could change it:
• Upside risk: A significant rise in global oil prices could enhance the Dirham's strength against the INR.
• Downside risk: Continued economic pressures in India, including tariff impacts and FPI outflows, could exert downward pressure on the Rupee.
