AED/JPY Outlook:
The AED/JPY outlook is slightly positive, but likely to move sideways as it trades just above its recent average with limited clear drivers.
Key drivers:
• Rate gap: The UAE Dirham is supported by its peg to the US Dollar, while the Bank of Japan's recent rate hike aims to combat inflation.
• Risk/commodities: Current oil prices are notably above average, boosting the UAE's foreign reserves which support the Dirham.
• One macro factor: Japan’s recent quantitative tightening plan may lead to further volatility in the yen as market reactions unfold.
Range:
Expect the AED/JPY to hold within its recent range, which has remained stable despite slight upward pressure.
What could change it:
• Upside risk: A significant rise in global oil prices could strengthen the AED further.
• Downside risk: Increased speculation about Japanese government intervention might weaken the yen.