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Forex

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

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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