Outlook
The UAE dirham is expected to stay anchored to the US dollar at 3.6725 AED per USD, preserving stability for importers, exporters, remitters, and travelers. The peg is supported by oil revenue dynamics, UAE foreign reserves, and monetary policy alignment with the US Federal Reserve. Ongoing diversification into tourism, real estate, and finance sustains resilience, while geopolitical stability underpins confidence. The March 2025 currency symbol introduction signals modernization but is unlikely to prompt near-term FX moves. Remittance flows may benefit modestly from weaker Asian currencies, adding a gentle support to the dirham backdrop.
Key drivers
- Fixed exchange rate peg to the USD at 3.6725 AED per USD, anchoring the dirham.
- Oil revenue and UAE foreign reserves underpin the ability to defend the peg.
- Monetary policy alignment with the US Federal Reserve influences domestic liquidity and rates.
- Economic diversification into tourism, real estate, and finance supports longer-term resilience.
- Geopolitical stability boosts investor confidence and FX stability.
- Remittance dynamics, including stronger inflows when source-country currencies weaken, can affect demand for the dirham.
- Currency symbol introduction in March 2025 reflects modernization, with limited near-term FX impact.
Range
AED/USD is steady at its 3-month average of 0.2723. AED/EUR is 0.2304, about 1.0% below its 3-month average of 0.2328, and has traded in a 4.5% range from 0.2263 to 0.2365. AED/GBP is 0.2000, about 1.6% below its 3-month average of 0.2033, with a 6.0% range from 0.1968 to 0.2086. AED/JPY is around 42.80, just 0.7% above its 3-month average of 42.52, having traded in a 4.5% range from 41.47 to 43.32.
What could change it
- U.S. monetary policy surprises or a stronger-than-expected USD that strengthens the USD/AED peg.
- Oil price volatility affecting UAE reserves and the ability to defend the peg.
- Any unexpected UAE monetary policy shifts or adjustments to the peg.
- Shifts in remittance flows tied to currency moves in large source markets.
- Geopolitical events that alter risk appetite and cross-border capital flows.
