The exchange rate for AED to ZAR has been under considerable pressure, recently trading at 90-day lows near 4.7687. This reflects a 4.0% decline from its 3-month average of 4.9674, indicating increased volatility in the market with fluctuations ranging from 4.7687 to 5.3844. Analysts attribute part of this movement to geopolitical tensions arising from Israel's military actions in Iran, which have led to heightened oil prices—a key factor in the South African rand's valuation given its dependence on commodity prices.
Economic growth prospects in the UAE remain robust, with the Arab Monetary Fund projecting a 6.2% growth rate for 2025, driven by boosts in tourism, real estate, and trade. However, the recent slowdown in the UAE's non-oil private sector growth, recorded at its weakest in nearly four years, raises concerns about the effectiveness of diversification efforts, which could impact the AED negatively.
The AED's value may also be influenced by the UAE's pursuit of a trade agreement with the U.S. aimed at reducing tariffs on steel and aluminum exports. This initiative could reshape trade balances and further inform currency dynamics in both the AED and ZAR markets.
Conversely, the South African rand faces challenges from external trade pressures, notably the 30% reciprocal tariff imposed by the U.S., worsening its current account deficits. The reliance on foreign investments makes the ZAR particularly sensitive to global investor sentiment. As oil prices remain volatile, currently trading at $68.80—3.2% above the 3-month average—any significant shifts could further impact the ZAR's strength, which traditionally correlates with oil price movements.
In summary, the interplay of these economic indicators suggests a cautious outlook for the AED/ZAR exchange rate. Analysts warn that the combination of geopolitical instability, domestic economic challenges, and bilateral trade negotiations may contribute to ongoing volatility and fluctuations.