Bias: The AED/PKR pair is currently bearish-to-range-bound, as it sits below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Central Bank of the UAE maintains a stable monetary policy aligned with the US Federal Reserve, while the State Bank of Pakistan anticipates a gradual depreciation of the PKR against the USD.
- Risk/commodities: Declining global oil prices could pressure the PKR, as oil revenue is crucial for Pakistan's economy and currency stability.
- One macro factor: Inflation in Pakistan is projected to average 4.4% in FY 2026, driven by rising costs in food and housing.
Range: The AED/PKR exchange rate is likely to drift within its recent range as both currencies react to macroeconomic pressures.
What could change it:
- Upside risk: A significant rise in oil prices could strengthen the PKR and pull the AED higher.
- Downside risk: Continued economic instability in Pakistan could lead to a faster-than-expected PKR depreciation.