AED/ZAR Outlook:
The AED to ZAR exchange rate is slightly weaker, but likely to move sideways as it trades below its recent average and is near recent lows. The current conditions indicate a lack of compelling drivers for a significant shift in either direction.
Key drivers:
• Rate gap: The recent interest rate cut by the South African Reserve Bank may favor the rand against the UAE Dirham, which remains stable despite its own recent cut.
• Risk/commodities: A rebound in oil prices is bolstering the rand, which is sensitive to commodity prices, but the AED's stability means it isn't directly impacted.
• One macro factor: A decline in South African inflation has prompted the SARB to cut rates, affecting investor outlook on the rand's future strength.
Range:
Expect the AED/ZAR to test recent extremes but likely not breach them significantly, given the current market dynamics.
What could change it:
• Upside risk: A stronger recovery in commodity prices, particularly in precious metals, could boost the rand.
• Downside risk: If political instability or governance issues resurface in South Africa, this may weaken the rand further.
