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Forex

New Zealand Dollar Jumped The Most Since November

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New Zealand Prime Minister, John Key

December is turning into a cruel month for traders counting on cuts in interest rates to drive down currencies.

New Zealand’s dollar jumped the most since November after central bank chief Graeme Wheeler delivered the policy easing that economists had predicted without the promise of further reductions. That came less just a week after his European counterpart, Mario Draghi, sparked the euro’s biggest rally since 2009 by unveiling a smaller-than-anticipated stimulus package.

The elephant in the room is the Federal Reserve. Its looming policy decision is making it trickier for speculators to predict the actions of other central banks and to work out where exchange rates are headed. As with the euro, strategists are now reassessing forecasts for the kiwi, becoming less certain how far it can extend this year’s 13 percent drop, which is already the steepest since 2008.

“Investors are clearly finding it harder to read central banks,” said Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group Plc in Singapore. “Central banks are all hoping the Fed’s imminent tightening will weaken their domestic currencies against the greenback, so they’re holding back on meeting the market’s expectations for further easing.”

The Parker Global Currency Manager Index of top funds has lost 0.7 percent this month to extend its slide in 2015 to 2.7 percent. That puts it on course for its worst annual decline since 2011.

Falling Short

For New Zealand dollar bears, Reserve Bank Governor Wheeler didn’t go far enough when he cut the official cash rate by a quarter-percentage point to 2.5 percent, completing the reversal of the four increases in 2014. They were left disappointed by his comments in Wellington on Thursday that the fourth cut this year should be enough to ensure inflation accelerates toward the central bank’s target. Lower interest rates tend to reduce demand for currencies.

Instead, traders will have to depend on the prospect of further U.S. rate increases, as well as the falling Chinese yuan and slumping commodity prices, to push the kiwi lower, RBS’s Mohi-uddin said.

The local dollar was at 67.53 U.S. cents as of 8:53 a.m. in London on Friday, having rallied from a six-year low of 61.30 on Aug. 24 and as low as 65.82 just after the RBNZ’s policy announcement. It gained as much as 1.7 percent by the New York close on Wednesday, the trading session that included the policy decision, the steepest intraday climb since Nov. 19.

‘Relatively Robust’

“We still like the U.S. dollar higher heading into the Fed, and the current concerns about commodity prices and China support the case for New Zealand dollar weakness,” said Raiko Shareef, a markets strategist at Bank of New Zealand Ltd. in Wellington. “But there will be some offset by a relatively robust New Zealand economy and an on-hold RBNZ, which means that weakness may be more modest than we’d thought earlier.”

Currency bears were also caught out as the euro surged 3.1 percent on Dec. 3 after the European Central Bank’s quantitative-easing overhaul and deposit-rate cut fell short of what some investors had predicted. Draghi repeatedly hinted about more easing in the run-up to the gathering, prompting hedge funds and speculators to push bets on a weaker euro close to a record.

After two cuts this year, the Bank of Korea left its benchmark rate unchanged Thursday, saying it would wait to see how the Fed’s decision impacted its economy.

That may focus attention on whether other central banks will be influenced by the prospect of an imminent U.S. rate increase. Officials in Sweden, Hungary and the Czech Republic are all due to meet before the Fed decision next week. Norway’s central bank will decide on policy after its U.S. counterpart.

Reassessing Forecasts

The full implications of this month’s decision in Wellington have yet to be digested. In the wake of the RBNZ meeting, Macquarie Bank Ltd. and Bank of New Zealand are both looking again at their forecasts for the kiwi to weaken to 61 U.S. cents in the first half of 2016. The median estimate in a Bloomberg economist survey is for a drop to 62 cents.

New Zealand’s dollar tumbled 18 percent against its U.S. counterpart in the first three quarters of this year, and since the end of September has rebounded almost 6 percent, outpacing all of its major peers. The resurgence has been helped by prices for dairy, the country’s biggest export, stabilizing after reaching a 12-year low in August.

Wheeler has now unwound all of the 1 percentage point of rate increases he carried out last year, taking borrowing costs back to the record low of 2.5 percent that he inherited when the New Zealand native took up his post in 2012 after spending more than a decade in Washington as a World Bank official.

Preserving Ammunition

“Strictly speaking, the explicit easing bias remains, but it is conditional and the RBNZ made it clear they think they have done enough,” said Gareth Berry, a foreign-exchange and rates strategist at Macquarie Bank in Singapore. “Apart from the usual sensitivity to dairy auctions, global influences will have a greater say.”

He has been relying on lower rates to make the nation’s exports more competitive, though he’s reluctant to ease further as Auckland’s property boom spreads and the economy shows signs of gaining momentum.

“It does seem that the central banks hope that the Fed will help them keep their currencies from rallying,” said Valentin Marinov, head of Group-of-10 currency research at Credit Agricole SA’s corporate and investment-banking unit in London. “They feel they need to preserve some of their ammunition for the future battles of the global currency war.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Naira

Daily Naira Exchange Rates; Thursday, May 6, 2021

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Naira Exchange Rates - Investors King

Naira depreciated further at the parallel market on Thursday as the local currency traded at N485 to a United States Dollar. The Nigerian Naira exchanged at N676 to a British Pound and N585 to a Euro as shown below.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
06/05/2021 480/485 665/676 575/585 62/69 395/405 292/320

Bureau De Change Naira Rates

Date

USD

GBP

EURO

NGN

BUY/SELL

BUY/SELL

BUY/SELL

06/05/2021

475/482

663/676

575/587

06/05/2021

475/482

663/676

575/587

Central Bank of Nigeria’s Official Naira Rates

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Forex

CBN Extends N5/$ Incentive Period to Boost Dollar Inflow

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has extended the N5 per US Dollar incentive on forex remittance indefinitely to boost liquidity and further deepen economic recovery.

The initiative was scheduled to end on May 8. It was introduced to encourage recipients of dollars to use formal banking channels and help the central bank capture such inflows to boost the stability of the local currency, which has been under pressure after oil prices plunged last year.

“We hereby announce the continuation of the scheme until further notice,” the regulator said in a statement on its website on Thursday.

The naira has been devalued three times since last year after a sharp drop in oil earnings, which accounts for 90% of foreign-exchange inflows, and remittances from workers abroad led to a dollar crunch in the West African nation, which produces the most crude in Africa. The local unit traded for 410.31 on the investors and exporters window, also called Nafex, as of 8:51 a.m. in Lagos.

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US Dollar

Dollar Falls as Risk Appetite Improves, Sterling Dips on BoE

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US Dollar - Investorsking.com

The dollar dropped to its lowest point in three days on Thursday as global market risk appetite improved, while sterling zig-zagged after the Bank of England slowed the pace of its bond-buying, but left interest rates unchanged.

Fewer Americans filed new claims for unemployment benefits last week, data showed, as COVID-19 vaccination efforts and massive amounts of government stimulus led to a further reopening of the economy.

While the U.S. economy has been gaining steam, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

Those statements reinforced “the lower-for-longer mentality with regards to interest rates,” making the greenback less appealing, said Neil Jones, head of FX sales at Mizuho.

The safehaven U.S. dollar was last down 0.31% at 91.977 against a basket of peer currencies.

“What we’ve seen early in New York is a little bit of back-and-forth gyrations, just because of the Bank of England meeting,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

“They kept their QE target in place but they said they are going to reduce the weekly pace of purchases, but that’s not a signal and so sterling has kind of gone up and down and done nothing at the end of the day,” Bregar said.

The pound was last down 0.08% against the weaker dollar at $1.3900 .

The euro was up 0.47% versus the dollar at $1.2061 , and up 0.65% against the pound, at 86.88 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

The Aussie was up 0.1% versus the U.S. dollar at 0.77515 at 1028 GMT, having hit as low of 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1% on the day.

“The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event,” wrote ING strategists in a note to clients.

The Canadian dollar hit a three-and-a-half year high, helped by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

In cryptocurrencies, ether traded around $3,500 after reaching a record high of $3,559.97 on Tuesday, skyrocketing nearly 800% this month.

Bitcoin declined 0.2% to $57,392.75.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

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