The naira traded close to its low on Wednesday due to strong demand for the haven currency in Africa’s largest economy, while the US dollar index resumed its upward trend following earlier losses from fresh bets on rate cuts this year.
According to data from FMDQ, the naira fell to N1,416.57 per dollar at the NAFEM spectrum on Monday from N1,354.21 per dollar.
The value of the Naira fell to N1,415 per dollar on Tuesday from N1,410 on Monday on the black market.
As a result, on Monday, the rate difference between NAFEM and the parallel market was N55.79 per dollar, but it is now only N1.57.
Highlights of price action With decreasing foreign exchange liquidity and bears positioned around the N1400 price support, naira short sellers have gained the upper hand in May. One additional explanation is that holders of Nigerian naira, who have begun to switch back to the US dollar despite the Economic and Financial Crimes Commission’s (EFCC) crackdown on currency dealers in Abuja and Lagos, are profit-taking.
In light of the crackdown on digital assets exchanged through unofficial channels, the Securities and Exchange Commission (SEC), working on behalf of the Federal Government, intends to delist the naira from all peer-to-peer cryptocurrency platforms to stabilize the nation’s foreign exchange market.
This action is in line with the FG’s stepped-up efforts to stop exchange rate manipulation and dollar racketeering.
According to the country’s financial authority, certain organizations used P2P networks to influence the value of the naira and the exchange rate.
The newly appointed SEC DG, Emomotimi Agama, confirmed that the government was developing new rules to regulate the cryptocurrency sector.
U.S. dollar index resumes positive trend
In addition to Tuesday’s 0.3% rise, the U.S. dollar index, which gauges the strength of the dollar versus the British pound sterling, the Euro, the Japanese yen, and three other significant rivals, increased by 0.14% to 105.5 index points.
Even if the Non-Farm Payroll (NFP) statistics from last week didn’t meet forecasts, the price action suggests that the US dollar will probably find support this week.
Despite a worse-than-expected jobs report and efforts by Federal Reserve officials to calm expectations of a rate hike, the dollar has continued its upward trend.
Investors are still closely watching the U.S. central bank and the timing of rate cuts, even though the bank has reiterated expectations that rates will likely decline by year’s end. These developments will probably have an impact on currency movements and further strengthen the dollar against most other currencies, including the naira.
Despite Neel Kashkari, the president of the Minneapolis Fed, saying on Tuesday that it is too soon to announce that inflation has stopped, the amount of rate cuts priced into the market has not altered.
More Federal Reserve members restated on Monday what Federal Reserve Chair Jerome Powell said on Wednesday regarding the continued impossibility of rate hikes.
John Williams, the president of the New York Fed, stated that interest rates will be cut “eventually” by the central bank, although he did not say when.
Top Fed official Thomas Barkin added that the current condition of interest rate policy is sufficiently restrictive to cool the US economy and bring inflation back to the bank’s target of 2%. The University of Michigan’s consumer confidence survey on Friday is the main event on this week’s sparse economic itinerary.
