The Canadian dollar (CAD) has faced downward pressure in recent weeks, primarily influenced by declining oil prices, a key determinant of its value. As of early October 2025, oil prices have slipped to approximately $65.45 per barrel, which is about 3.5% below the three-month average of $67.81. This trend is raising concerns over a potential oversupply situation, especially ahead of the upcoming OPEC+ meeting. Analysts note that fluctuations in oil prices have a direct impact on the Canadian economy, and subsequently, the CAD tends to weaken when oil prices fall.
Recent forecasts indicate that external factors, particularly anticipated U.S. Federal Reserve interest rate cuts, could provide some support for the CAD. A Reuters poll suggests that if the U.S. dollar weakens due to these cuts, the CAD could appreciate by approximately 2.8% over the next three months. However, amid the current volatility, the CAD trades at 2.6317 AED, which is 1.1% below its three-month average of 2.6612, reflecting a stable range between 2.6296 and 2.7013 AED.
Additionally, other domestic factors play a crucial role in shaping the CAD's future trajectory. Notably, the Canadian manufacturing sector has shown signs of contraction, as evidenced by the S&P Global Canada Manufacturing PMI, which fell to 47.7 in September. This decline has fueled expectations for potential interest rate cuts by the Bank of Canada, further complicating the outlook for the CAD.
In contrast, the UAE dirham (AED) remains stable, bolstered by a recently signed currency swap agreement between the UAE and Turkey, which aims to enhance liquidity and financial transactions. Recent developments, including an interest rate cut by the UAE central bank, have positively impacted local stock markets and further stabilized the AED against major currencies.
The future performance of the CAD to AED exchange rate will largely depend on the interplay of oil market trends, the outcomes of monetary policy decisions from both the Bank of Canada and the UAE central bank, and the overall global economic landscape. Businesses and individuals engaged in international transactions should remain attentive to these developments, as they can significantly influence exchange rates in the near term.
