The Canadian dollar (CAD) remains under pressure, recently seen at 14-day lows near 2.6805 against the Emirati Dirham (AED), which is approximately 1.5% above its three-month average of 2.6415. Analysts have noted that the CAD's value has experienced relative stability within a 6.3% range, oscillating between 2.5464 and 2.7061. Despite some support from rising oil prices—currently trading at 90-day highs near $78.85, 17.1% above the three-month average of $67.33—the CAD's performance has been muted, particularly in the wake of political instability in Canada following the resignation of Prime Minister Justin Trudeau.
Market experts attribute part of the CAD's struggles to external factors, particularly trade tensions with the United States. Tariffs imposed by the U.S. on Canadian steel and aluminum have created uncertainties that limit the potential upside for the currency. Additionally, the Bank of Canada has paused interest rate cuts at 2.75%, which, while stabilizing, does not provide the momentum needed to strengthen the CAD amidst broader economic concerns.
Reports indicate that the outlook for the CAD is heavily linked to oil price fluctuations, given Canada's status as a major oil exporter. A rise in oil prices typically benefits the CAD by boosting export revenues; however, current geopolitical tensions could lead to increased volatility and complicate the outlook. The CAD's ties to the U.S. economy are also significant, as approximately 75% of Canadian exports go to the U.S., meaning developments in U.S. economic policy directly influence the loonie.
On the other hand, the AED is influenced by various domestic developments, including efforts to grow the UAE economy—forecasted to expand by 6.2% in 2025 due to improvements in sectors like tourism and international trade. Recent geopolitical tensions in the region, however, could create volatility that affects the AED's stability. Additionally, the UAE's initiatives to diversify its economy, such as heavy investments in artificial intelligence, signal long-term growth potential.
In summary, the CAD/AED exchange rate is currently vulnerable to both internal Canadian issues, particularly related to political and trade uncertainties, and external pressures from geopolitical events and oil price volatility. Stakeholders should consider monitoring upcoming economic indicators and developments in these key areas to navigate currency fluctuations effectively.