AED/PKR Outlook:
Slightly weaker, but likely to move sideways; the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The UAE Dirham is backed by a stable peg to the US Dollar, whereas the Pakistani Rupee is affected by inflation and geopolitical tensions.
• Risk/commodities: Recent declines in oil prices may pressure the AED's value, impacting the currency's peg indirectly through oil revenue.
• One macro factor: High inflation in Pakistan continues to erode the PKR's purchasing power, contributing to its overall depreciation.
Range:
Expect the AED/PKR to drift within the current 3-month range, with minor fluctuations likely as it hovers near recent lows.
What could change it:
• Upside risk: A significant recovery in oil prices could strengthen the AED, boosting its value against the PKR.
• Downside risk: Further geopolitical tensions or a worsening of inflation could lead to additional depreciation of the PKR.