AED/SGD Outlook: Likely to decrease, as the rate is below its recent average and near recent lows, influenced by key economic factors.
Key drivers:
- Rate gap: The UAE Dirham's peg to the US Dollar helps maintain stability compared to the Singapore Dollar, which has experienced a more accommodative monetary policy.
- Risk/commodities: Recent fluctuations in oil prices have kept pressure on currencies tied to commodities, affecting the UAE Dirham's relative strength against the Singapore dollar.
- One macro factor: Singapore's projected core inflation rate is expected to decline, which may hinder the Singapore economy's competitiveness compared to the UAE’s robust credit growth.
Range: The AED/SGD rate is likely to drift within its recent range, facing limited potential for upward movement.
What could change it:
- Upside risk: A significant spike in oil prices could enhance the UAE Dirham's appeal.
- Downside risk: Further easing in Singapore's monetary policy could weaken the Singapore Dollar more significantly.