The UAE Dirham (AED) has experienced several key developments recently that may impact its exchange rate. A significant currency swap agreement between the UAE and Turkey, valued at 18 billion AED, was signed on October 2, 2025. This initiative aims to enhance liquidity in local currencies and facilitate financial transactions between the two nations, which could lead to increased economic ties and stability for the AED.
Additionally, the UAE Central Bank's decision to cut interest rates by 0.25 percentage points on September 19, 2025, has propelled optimism in the local stock markets, further boosting investor confidence. Such monetary policy adjustments can influence the AED's strength, particularly in relation to international currencies. In light of this rate cut, both Dubai and Abu Dhabi markets saw gains, reinforcing the AED's stability.
The AED has appreciated against several Asian currencies over the past month. This trend positively impacts remittances sent by expatriates in the UAE, as their value against currencies like the Indian Rupee, Pakistani Rupee, and Philippine Peso has strengthened.
In terms of exchange rates, the AED/USD remains steady at its 3-month average of 0.2723. However, it has recorded a downturn against the Euro and the British Pound, with the AED/EUR trading at 7-day lows near 0.2347, though it remains above its 3-month average. The AED/GBP is also at 30-day lows near 0.2056, only slightly above its long-term average. The AED/JPY has similarly seen a decline to 7-day lows of 42.50, yet it remains 3.2% above its 3-month average.
Furthermore, the launch of the Retail Sukuk initiative by the UAE Ministry of Finance aims to broaden the investment base and encourage savings among citizens and residents, signaling a robust outlook for the local economy.
Overall, while the AED maintains a stable position against the USD, fluctuations against the Euro and British Pound highlight market sentiments influenced by both domestic and international factors. As currency analysts keep monitoring these developments, businesses and individuals engaged in international transactions may want to consider the implications of these trends on their currency exposures.
