AED/CNY Outlook:
Bearish, as the rate is below its recent average and near recent lows, reflecting ongoing pressures.
Key drivers:
• Rate gap: The UAE Dirham's peg to the US Dollar maintains its stability, while the People's Bank of China (PBOC) has recently reduced interest rates, supporting CNY.
• Risk/commodities: Global oil prices are currently below average, impacting UAE's revenue and thus the Dirham's value.
• One macro factor: China's recent government stimulus has led to stronger-than-expected economic growth, which may support the yuan against the Dirham.
Range:
Expect AED/CNY to drift within its recent 3-month range, given the current bearish pressure.
What could change it:
• Upside risk: A significant recovery in oil prices could boost the UAE's foreign reserves, supporting the Dirham.
• Downside risk: Further quantitative easing measures by the PBOC could lead to additional CNY strength, exacerbating the rate's decline.