AED/JPY Outlook:
The AED/JPY outlook is slightly positive but likely to move sideways. The rate is currently near recent highs but lacks a distinct driving force to extend gains, trading close to its 90-day average.
Key drivers:
• Rate gap: The UAE Central Bank's stable rate policy contrasts with the Bank of Japan's recent interest rate hike, favoring the AED against the JPY.
• Risk/commodities: Surge in global oil prices is contributing to increased import costs for Japan, which tends to weaken the JPY as import expenditures rise.
• One macro factor: Concerns over Japan's fiscal sustainability due to proposed tax cuts may impact investor confidence, further pressuring the JPY.
Range:
Expect the AED/JPY to drift within its recent range, as it tests the upper extremes near current levels.
What could change it:
• Upside risk: A significant rise in oil prices could favor the AED further if it strengthens UAE's export revenue.
• Downside risk: Renewed concerns over Japan's economic stability could weaken the JPY, impacting the exchange rate negatively.