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Emerging-Market Currencies Surge on China Stimulus Hopes

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Indonesia’s rupiah led emerging-market currencies higher before a report on the U.S. economy and as China signaled it will take more steps to support growth. Developing-nation stocks traded little changed.

The rupiah headed for the longest rally since October after the government announced its eighth policy package. The offshore yuan rose the most in a week. Malaysia’s Axiata Group Bhd. paced gains for emerging-nation telecom companies after buying a stake in a Nepalese phone carrier. True Corp., a Thai phone stock, rebounded from the steepest slump in 11 months. Taiwan’s 10-year government bond yield fell to a record-low.

China’s government said monetary policy must be more “flexible” and fiscal policy more “forceful” to stem slowing growth in an economy that many emerging countries count as their biggest trading partner. Developing-nation currencies climbed for a third day, extending last week’s gains as bets that the Federal Reserve will raise interest rates gradually bolstered demand for riskier assets. A report Tuesday is forecast to show the U.S. economy grew less than previously estimated in the third quarter.

“Chinese stimulus is positive for the economy and many investors are gauging the general impact of any new measures as well as the longer-term impact of the Fed rate increase,” Attila Vajda, managing director of Project Asia Research & Consulting Pte., a Singapore-based advisory firm, said from Ho Chi Minh City. “The holiday season is impacting liquidity.”

The MSCI Emerging Markets Index was little changed at 791.54 at 12:27 p.m. in Hong Kong, trading below its 50-day moving average for almost a month. The stock benchmark has fallen 17 percent this year, set for the worst annual performance since 2011. The average valuation of companies on the gauge is 11.1 times estimated 12-month earnings, a 29 percent discount to the MSCI World Index, which has slid 4.1 percent in 2015.

A gauge tracking 20 emerging-market currencies rose 0.1 percent. The rupiah strengthened 1.1 percent, its fourth day of gains. Under a policy package announced on Monday, private-sector companies will be allowed to build oil refineries as long as they sell the end product to state-owned PT Pertamina. The nation will also scrap import taxes on aviation spare parts to support that industry.

The offshore yuan added 0.23 percent, according to data compiled by Bloomberg. South Korea’s won rose 0.2 percent in a two-day increase. “China’s stimulus is highly likely to support the won, just as the yuan halted its drop,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “The dollar’s strength is losing steam when Korean exporters keep selling the dollars.”

Bonds

The yield on Taiwan’s 2025 bonds dropped three basis points to 1.015 percent, after earlier declining to 1.011 percent, an intraday record low for benchmark 10-year notes, Taipei Exchange prices show. The five-year yield fell two basis points to an unprecedented 0.60 percent. Disappointing economic data fueled speculation the central bank will ease monetary policy again after delivering two interest-rate cuts this year. Bonds surged last week after the central bank lowered its benchmark rate for the second straight quarter.

Five out of 10 industry groups in MSCI’s emerging-markets measure rose, led by telecommunication and health-care shares, while technology companies declined. Axiata climbed 2.8 percent in Kuala Lumpur after agreeing to buy a 80 percent stake in Ncell for $1.4 billion. True Corp. advanced 2.3 percent, halting a four-day slump.

The Shanghai Composite Index fell from a three-week high, dragged down by losses for the best-performing industry groups this year, as investors weighed growth measures from the nation’s top economic conference. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong fell 0.4 percent. Equity gauges in Malaysia, Indonesia, Philippines gained at least 0.2 percent.

Bloomberg

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.

Forex

Naira Gains N1 to N483 Against US Dollar as CBN Warned Speculators of Impending Doom

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Naira Remains under pressure

The Central Bank of Nigeria on Tuesday warned speculators and hoarders of the United States Dollar against creating artificial forex scarcity for personal gain.

Godwin Emefiele, the Governor of the Central Bank of Nigeria, said black market forex rates does not reflect the economic reality of the Nigerian Naira as that section of the forex is tainted with bribes and individuals looking to profit at the expense of the nation.

We do not agree that the determining factor for our currency should be based on a market that is tainted, where people go to offer bribes,” he stated during a virtual monetary policy committee briefing in Abuja.

The Nigerian Naira gained N1 against the United States dollar to trade at N483 at the parallel market also known as the black market, up from N484 it traded on Monday.

Emefiele said “The black market is illegal where people do not provide documentation to support transactions. It is unfortunate and unfair for analysts to say Nigeria’s exchange rate is at 480 per dollar.”

The Association of Bureau De Change Operators of Nigeria (ABCON) agreed with the central bank, saying speculators and currency hoarders are responsible for the wide forex rates. The association warned that speculators are going to lose money given that the apex bank has foreign reserves of $36 billion to support the local currency and meet forex demands.

The apex bank left the interest rate unchanged at 11.5 percent to further stimulate growth in the real sector and speed up the recovery process with cheaper loans. Other ratios were left unchanged as well.

Speaking on the rising inflation rate, Godwin Emefiele attributed the 14.23 percent increase in consumer prices to the rising pump price, the recent #EndSARS protest and structural policies.

Therefore, it looks like the apex bank will damn rising inflation for the first time to focus on economic productivity, new job creation and general growth.

The Naira CBN official rate remains $379 to a United States Dollar while it exchanged at N385 on the Investors and Exporters Forex Window on Tuesday.

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Bureaux De Change Association Warns Against Hoarding of US Dollar, Says Speculators will Lose

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Naira Dollar Exchange Rate

The Association of Bureaux De Change Operators of Nigeria (ABCON) on Sunday warned currency speculators and hoarders of impending losses if they do not desist from creating bogus foreign exchange rates for personal gain.

In a statement titled, “ABCON warns speculators will lose money as CBN has enough reserves to fund market, defend naira”, the association said speculators and hoarders are taking a huge risk as the Central Bank of Nigeria has enough liquidity to defend the Naira and maintain stability against global foreign counterparts.

This is coming few days after the local currency plunged to N484 to a United States dollar and N620 against the British Pound at the black market due to the rising demand and persistent scarcity that most hoarders interpreted as lack of financial muscle on the part of the central bank, especially if the nation’s falling foreign reserves is factored in.

However, ABCON said with about $36 billion foreign reserves, the Central Bank of Nigeria has the necessary means to punish speculators and hoarders they described as enemies of the nation.

President of ABCON, Alhaji Aminu Gwadabe, explained that the central bank is working to unify the nation’s foreign exchange rates and eliminate past challenges that have made market determined forex rates almost impossible.

He said “I think that the CBN by pushing the official foreign exchange rate from N306 to N379 to the dollar is in line with market demand.

“It has also helped to narrow the official-parallel market rates gap that formed the basis of ridiculous speculations among unpatriotic forex dealers and spectators.

Gwadabe, however, advised the Federal Government to improve security surveillance at the nation’s land borders to checkmate illegal foreign currency cash deals.

He also asked the central bank to raise liquidity ratio of bureau de change operators to discourage dollar holdings.

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Forex Scarcity Plunges Naira to N620 Against British Pound

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Naira Exchanges at N620 to a British Pound at Black Market

Lingering foreign exchange scarcity has plunged the Nigerian Naira to a record-low of N620 against the British Pound at the black market.

The declined by a record N14 from the N607 it exchanged to a single British Pound on Thursday to N620 on Friday, signaling rising demand for forex amid persistent scarcity.

Experts have attributed the surge in demand to the usual push for the end of the year sales by importers and businesses looking to close the sales gap created by the COVID-19 lockdown.

The local currency plunged against global counterparts by the most in recent months on Friday. The Naira declined by N13 against the European common currency to exchange at N570.

Similarly, the Naira lost another N4 against the United States dollar to exchanged at N484, further down from N480 it was sold on Thursday.

Experts are predicting further decline for the Nigerian Naira, largely due to the weak macro fundamentals, overexposure to crude oil uncertainty and US Dollar.

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