The American dollar fell on Tuesday morning at London’s trading session, reacting to the U.S. Federal Reserve’s speech yesterday that it would start purchasing more risky assets such as investment-grade U.S. corporate bonds.
The U.S. Dollar Index that tracks the American dollar against a bouquet of other currencies dropped 0.14% to 96.5.
Global Investors and traders appetite for risk increased in momentum as the Federal Reserve aims to help the firm have easier access to cheap cash as well as facilitate market liquidity
Why tracking the dollar index is necessary; Individuals, businesses and currency traders assessing the U.S dollar in relation to other major currencies can gauge its relative value, and calculate the amount of dollars needed to process their payment obligations.
“It’s a dramatic turnaround…it just seems to reinforce that message that you shouldn’t and can’t fight the Fed here, and everything follows from that really,” National Australia Bank head of FX strategy Ray Attrill told Reuters.
READ MORE: Naira’s volatility remains stable at the parallel market
However, USD/JPY pair kept its gains of about 0.16% to 107.48, with the safe-haven currency staying around its range since April and indicating that some investors remained cautious.
“The key question for investors and traders is whether the gains represent a change in sentiment or a short-term sugar hit,” CMC Markets’ chief strategist, Michael McCarthy, told Reuters.
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Olumide Adesina a French-born Nigerian, an Investment Professional at Nairametrics Financial Advocates, owners of Nairametrics.com. Olumide Adesina is a Certified Investment Trader, with more than a decade working expertise trading Financial Instruments, holder of several prestigious Financial Certifications. A member of the Chartered Financial Analyst Society. You can follow Olumide on twitter @tokunboadesina and email via olumide.adesina@nairametrics.com.
CURRENCIES
Naira drops slightly at black market, breaching its support levels
Naira to sell at a rate of N451 to $1 at the black market as against N450 to $1 recorded on Monday.
Published
31 mins agoon
June 16, 2020
The naira fell slightly on Tuesday morning to sell at a rate of N451 to $1 at the black market as against N450 to $1 recorded on Monday, showing a differential of one naira.
It should be observed that the naira has been hitting record lows on the parallel and over-the-counter spot markets since early March when the Central Bank of Nigeria (CBN) adjusted the value of the naira by 15%.
However, lately, Nigeria’s local currency, maintained stability against the American dollar at the parallel segment of the foreign exchange market, in recent days, Nigeria’s currency remained at N450 to $1 for the past 10 days refusing to breach the N450 support levels until now.
Meanwhile, a Forex dealer at a leading tier 1 bank talked about the fundamentals expected to happen at the spot market. He said:
“The CBN will sustain its interventions in various windows with probable injection of $80million to Invisibles and SME (Small Medium Enterprises) segment at $/₦383.75 while the CBN will conduct its Bi-weekly Retail SMIS Auction on Friday with stop rate at $/₦365 for 180-day forward.
“The scarcity of funds in the Investors’ and Exporters’ FX window will persist this week as the current depressed yield in the Fixed Income is unattractive to entice fresh inflows from foreign portfolio investors amidst significant convertibility risk and negative real return.
“Naira will trade at sub $/₦390 levels through-out the week.”
CURRENCIES
Naira depreciates against dollar at I&E forex window, dollar supply up by 14.52%
The exchange rate at the I&E window is different from the CBN’s published exchange rate.
Published
3 hours agoon
June 16, 2020
The positive performance of the naira in the foreign exchange market slowed today, as the local currency was strengthened at the Investors and Exporters (I&E) window.
The naira depreciated to N386.50 to a dollar at the I&E forex window, after the day’s trading session. It lost N0.75 against the dollar when compared to the N385.75 to a dollar that it exchanged on Friday, June 12, 2020.
The exchange rate at the I&E window is different from the Central Bank of Nigeria’s published exchange rate, which currently stands at N360/$1. This is also different from the exchange rate at the parallel market, which was stable at N450 to a dollar, according to information on AbokiFX, as of Monday, June 15.
Available information from the daily trading at FMDQ (where FX is traded by importers and investors) shows that the naira improved against the dollar by N0.96, closing at N386.50 to a dollar, as against the indicative opening rate of N387.46 to a dollar that it opened with on Monday morning. The opening indicative rate on Monday also represents a marginal gain of N0.04 when compared to the N387.50 that it opened with on Thursday.
A cursory look at data from the FMDQ shows that the turnover for the day increased by 14.62% at $14.27 million, when compared with the $12.45 million that was recorded on Thursday, June 11.
In a related development, the local currency on Monday, June 15, 2020, remained stable for the third consecutive working day at the parallel market, otherwise known as the black market, as it exchanged for N450 to a dollar, which was the same rate that was recorded on Thursday.
The stability of the naira at the black market can be attributed to a drop in demand for foreign exchange, especially by speculators at the market. Although the local currency has been hitting record lows both at the parallel market and over the counter spot markets since the rate adjustment by CBN in March, analysts do not expect any significant change in the exchange rates in the coming week, as there are no strong fundamentals to cause such changes.
However, according to the Medium Term Expenditure Framework and Fiscal Strategy (MTEF/FSP) report that was released by the Federal Ministry of Finance, Budget and National Planning, the exchange may be further devalued to help reduce the wide disparity in the foreign exchange market.
CURRENCIES
Naira expected to remain relatively stable
Naira has been hitting record lows on the parallel and over-the-counter spot markets since early March.
Published
1 day agoon
June 15, 2020
The naira closed last week at a rate of N387 to $1 on the spot market, while the two-week currency futures traded at N389.84. The naira was quoted at N361 to $1 on the official market, which is backed by Nigeria’s central bank.
Specifically, the 1-month (+0.1% to N388.71/USD), 3-month (+0.4% to N392.70/USD), 6-month (+0.8% to N398.45/USD), and 1-year (+2.3% to N416.25/USD) contracts all appreciated against the (United States dollar.
However, at the currency futures market, the 5 years futures were quoted at N578.37 to $1, just off a record low of N584.11 recorded last week, as dollar scarcity for businesses and individuals in genuine need continued to raise concerns.
Nigeria’s local currency has been hitting record lows on the parallel and over-the-counter spot markets since early March when the Central Bank of Nigeria (CBN) adjusted the value of the naira by 15%.
READ MORE: Naira falls at the black market despite growing Nigerian foreign exchange reserves
Victor Silas, an investment analyst spoke on the phone with Nairametrics, giving insight on future stability in the naira. He said:
“For the outlook on the naira in the coming week, I do not foresee significant changes to the current rate, considering sentiments at the I&E windows strengthening last week to N385.75/$ levels and the parallel market stable at 440/450 levels.
“There are no strong fundamentals to move those rates from current levels. I expect rates to be stable in the coming week.”
It can be recalled that some weeks ago, CBN resumed dollar sales to individuals and businesses with genuine needs, selling around $100 million per week, thereby helping to bring some stability to Nigeria’s local currency, though it is yet to resume selling to foreign-based investors. It had scrapped a planned auction due to lockdown measures to slow the COVID-19 pandemic.
A Forex dealer at a leading tier 1 bank talked about the fundamentals expected to happen at the spot market. He said:
“The CBN will sustain its interventions in various windows with probable injection of $80million to Invisibles and SME (Small Medium Enterprises) segment at $/₦383.75 while the CBN will conduct its Bi-weekly Retail SMIS Auction on Friday with stop rate at $/₦365 for 180-day forward.
“The scarcity of funds in the Investors’ and Exporters’ FX window will persist this week as the current depressed yield in the Fixed Income is unattractive to entice fresh inflows from foreign portfolio investors amidst significant convertibility risk and negative real return.
“Naira will trade at sub $/₦390 levels through-out the week.”
READ MORE: Naira further strengthened at the I&E forex window, as local currency stabilizes
The CBN recently said that it would use all the monetary tools it had to rescue the Nigerian economy from the fallouts of the COVID-19 induced global economic strain, and stabilize the naira. It had also taken some concrete steps to tackle currency speculators.
Philip Anegbe, Team Lead, CardinalStone Research told Nairametrics what he expects of the naira:
“With the recent recovery in oil price and greater scope for more concessionary borrowing/debt reliefs, we now expect the CBN to reprice the naira to N400/$ at the I&E window by year end, with a trading band of N390/$ to N410/$.
“However, our fundamentally obtained fair value remains N440/$ even though the reality of CBN’s currency management makes a full tilt to market-driven pricing highly unlikely this year.”
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