AED/ZAR Outlook: Slightly weaker, but likely to move sideways, as it is below its recent average and near recent lows with no clear driving force.
Key drivers:
• Rate gap: The Central Bank of the UAE maintains a stable monetary policy aligned with the US, contrasting with the South African Reserve Bank's recent interest rate cut, which may weaken the ZAR.
• Risk/commodities: Oil prices are currently high, benefiting the ZAR as South Africa is a net exporter of minerals, including those which rely on oil demand.
• One macro factor: The South African economy is showing signs of recovery, aided by increased foreign investment in local bonds, enhancing ZAR's attractiveness.
Range: Expect the AED/ZAR to hold steady within its recent range, without significant upward or downward pressure in the short term.
What could change it:
• Upside risk: A surprising jump in oil prices could enhance ZAR's strength, lifting the AED/ZAR rate.
• Downside risk: Further easing measures by the South African Reserve Bank could lead to increased ZAR weakness against the AED.
