Bias: Bullish, as the AED is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: The UAE Dirham benefits from a stable peg to the US Dollar and a central bank rate closely aligned with the U.S. Federal Reserve, while Taiwan's central bank has adopted a non-intervention policy despite the TWD’s recent appreciation.
• Risk/commodities: The recent rise in oil prices has generally supported the strength of the AED, reinforcing its position against currencies like the TWD amidst fluctuating commodity market conditions.
• Macro factor: The TWD's significant annual gain against the USD reflects a strong local economy and global capital flows but also poses risks of volatility as market conditions change.
Range: Expect the AED/TWD to hold near current levels, with potential for minor fluctuations within the established range.
What could change it:
• Upside risk: A continued increase in oil prices could further boost the AED.
• Downside risk: A reversal in TWD's recent gains may pressure the AED/TWD exchange rate.
