AED/SAR Outlook:
Slightly weaker, but likely to move sideways, as the rate is near its 90-day average and recent lows.
Key drivers:
• Rate Gap: The UAE Dirham is fixed to the US Dollar, while the Saudi Riyal also remains pegged, leaving little room for divergence between the two currencies.
• Oil Revenue Impact: Since oil prices are currently volatile, fluctuations could influence the capacity of both countries to maintain their currency pegs reliably.
• Economic Diversification: The UAE's growth in sectors such as tourism and finance continues to attract foreign investment, supporting the Dirham against the Riyal.
Range:
The AED/SAR pair is likely to hold within its recent 3-month range, showing minimal movement at current levels.
What could change it:
• Upside risk: A strong recovery in oil prices may bolster both currencies, improving the AED's position against the SAR.
• Downside risk: Increased geopolitical tensions in the region could negatively affect investor confidence, weakening the Dirham relative to the Riyal.
