AED/ZAR Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and within a volatile range.
Key drivers:
• Rate gap: The UAE's monetary policy is stable, while South Africa's recent rate cut is expected to pressure the rand, potentially allowing the AED to strengthen against it.
• Risk/commodities: Rising global oil prices have generally supported the rand’s strength, benefiting South Africa's commodity export-driven economy amidst a weaker dollar.
• One macro factor: With South Africa’s inflation decreasing, the SARB's monetary easing could limit the rand's upward momentum, making it harder for AED to gain significantly.
Range: The AED/ZAR is likely to hold within its recent range, showing limited movement upward or downward in the near term.
What could change it:
• Upside risk: A surge in oil prices could further elevate the rand's appeal, shifting demand away from the AED.
• Downside risk: Unexpected negative domestic data from South Africa might lead to deeper declines in the rand, bolstering the AED.
