No one knows exact reasons why dry skin is associated with diabetes. However, it is observed that both type 1 diabetes and type 2 diabetes patients can have skin problems, including dry skin. With diabetic nerve damage, a diabetic may not be aware of dry skin conditions and may have an increased likelihood of having cracks in the skin that can get infected. This infographic shows some simple tips to keep the skin under check.
Infographic Source: http://diabeteslibrary.org/diabetes-and-dry-skin/