SGD/AED Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average but lacks a clear driver.
Key drivers:
- Rate gap: The Monetary Authority of Singapore has adopted a more accommodative monetary policy, contrasting with the UAE's stable rate aligned with the US Federal Reserve.
- Risk/commodities: Current oil prices are above average, positively impacting the UAE's foreign reserves and supporting the Dirham's stability.
- One macro factor: Singapore's economic performance exceeded expectations with a strong growth of 5% in late 2024, boosting the Singapore Dollar's strength.
Range:
Expect the SGD/AED to hold and possibly drift within its recent range.
What could change it:
- Upside risk: A significant improvement in global trade dynamics could enhance Singapore's exports, strengthening the SGD.
- Downside risk: Increased tariffs on Singapore goods by the US could further challenge Singapore's export-dependent economy, weakening the SGD.
