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Yuan Sinks to Five-Year Low as PBOC Surprises With Weaker Fixing

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Yuan

The yuan sank to a five-year low after China’s central bank set the currency’s reference rate at an unexpectedly weak level, a sign that policy makers are becoming more tolerant of depreciation as intervention costs rise and economic growth slows.

The People’s Bank of China cut its daily fixing to the lowest level since April 2011, weaker than Tuesday’s onshore closing level. The currency tumbled 1.1 percent in Hong Kong’s freely traded market — the most since the day after a surprise devaluation in August — and lost 0.6 percent in Shanghai as both exchange rates slumped to their weakest levels since at least March 2011. The gap between the two widened to a record.

While China’s defense of the yuan stabilized the currency for almost four months following the Aug. 11 devaluation, intervention led to the first-ever annual decline in the nation’s foreign-exchange reserves. Official support has been more sporadic since the start of December as the weakest economic expansion in a quarter century and rising U.S. interest rates fueled capital outflows. Analysts at Macquarie Bank Ltd. and Mizuho Bank Ltd. said the PBOC’s exchange-rate policy is becoming harder to gauge.

“The market will be confused by what Beijing is trying to signal with the recent market intervention and today’s fixing,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank in Singapore.

The central bank intervened in the currency market on Tuesday to prevent excessive volatility, said a person with direct knowledge of the matter. A few major Chinese banks sold U.S. currency when the onshore yuan dropped to around 6.5460 per dollar on Wednesday, but the offerings weren’t stable or constant, according to traders who asked not to be named.
The offshore yuan dropped beyond 6.70 per dollar for the first time since September 2010, about two months after trading was first permitted in Hong Kong, while the onshore rate was 6.5560 as of 5:05 p.m. in Shanghai. The Hong Kong rate’s discount to the domestic level widened to a record 2.5 percent, after spreads of up to 1.8 percent triggered suspected PBOC intervention in the offshore market last week.

The central bank’s August devaluation, which sparked a rout in emerging-market currencies and stocks, was accompanied by a revamp of its methodology for setting the yuan’s daily fixing to give market forces greater sway. While allowing depreciation may help the Chinese economy, it risks spooking global markets, according to Japan’s Resona Bank Ltd.

Bloomberg

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Naira’s Upsurge Strains Nigeria’s Foreign-Exchange Reserves

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New Naira notes

As the Nigerian Naira continued to rebound from its record low against its global counterparts, the nation’s foreign exchange reserves has been on the decline, according to the data published by the Central Bank of Nigeria (CBN) on its website.

CBN data showed liquid reserves have plummeted by 5.6% since March 18 to $31.7 billion as of April 12, the largest decline recorded over a similar period since April 2020.

The recent surge in the Naira follows a series of measures implemented by the Central Bank to liberalize the currency market and allow for a more flexible exchange rate system.

These measures included devaluing the Naira by 43% in January and implementing strategies to attract capital inflows while clearing the backlog of pent-up dollar demand.

Charles Robertson, the head of macro strategy at FIM Partners, acknowledged the Central Bank’s efforts to restore the Naira to a realistic exchange rate, suggesting that it aims to stimulate investment in the local currency and enhance liquidity in the foreign exchange market.

Despite the rapid depletion of foreign-exchange reserves, Nigeria still maintains a significant cushion, bolstered by a rally in oil prices and inflows from multilateral loans.

Gross reserves of approximately $32.6 billion provide coverage for about six months’ worth of imports, according to the International Monetary Fund.

The Central Bank’s disclosure last month that it had cleared a backlog of overdue dollar purchase agreements, estimated at $7 billion since the beginning of the year, indicates progress in addressing longstanding currency challenges.

However, uncertainties remain regarding the extent of dollar debt retained by the Central Bank as revealed by its financial statements late last year.

Furthermore, the decline in foreign-exchange reserves persists despite a surge in inflows into Nigeria’s capital markets, driven by interest rate hikes and increased attractiveness of local debt.

Foreign portfolio inflows exceeded $1 billion in February alone, contributing to a total of at least $2.3 billion received so far this year, according to central bank data.

Analysts remain cautiously optimistic about the trajectory of Nigeria’s foreign-exchange reserves, anticipating stabilization or potential growth fueled by anticipated inflows from Afreximbank, the World Bank, and potential eurobond issuance.

Also, the resurgence of oil prices and the expected return of remittances through official channels offer prospects for replenishing reserves in the near future.

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Naira

Dollar to Naira Black Market Today, April 17th, 2024

As of April 17th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,50 NGN in the black market, also referred to as the parallel market or Aboki fx.

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As of April 17th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,50 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,70 and sell it at N1,060 on Tuesday, April 16th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

  • Buying Rate: N1,050
  • Selling Rate: N1,040

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Naira

Naira Appreciates to N1,136/$ Officially, N1,050/$ Parallel Market

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The Nigerian Naira appreciated to N1,136 against the United States Dollar at the official market and rose to N1,050 at the parallel market.

At the official foreign exchange market, data from the FMDQ Exchange revealed that the Naira strengthened by 6.1 percent or N69 from its previous rate of N1,205/$ recorded on Friday to N1,136/$ on Monday.

This surge underscores the effectiveness of recent foreign exchange directives implemented by the Central Bank of Nigeria (CBN), aimed at stabilizing the Naira and bolstering liquidity in the market.

At the parallel market, the Naira appreciated to N1,050 against the Dollar, reflecting an improvement in the currency’s value in informal trading circles.

This resurgence has brought renewed hope to traders and businesses operating in the informal sector, as they anticipate further strengthening of the Naira in the coming days.

The improved exchange rate follows a series of strategic interventions by the CBN to address foreign exchange challenges and stabilize the Naira.

The positive momentum in the forex market has been further reinforced by a surge in total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM), which increased by 41.7 percent to $3.75 billion in March, compared to $2.64 billion in February.

Commenting on the recent developments, analysts at Afrinvest expressed optimism about the continued strengthening of the Naira, attributing it to the CBN’s intensified efforts to bolster liquidity in the market.

They anticipate further improvements in the exchange rate as the apex bank maintains its proactive stance on forex management.

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