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.
CBN Refutes Rumours Of Naira Replacement
The Central Bank of Nigeria (CBN) has on Saturday, refuted rumours that it planned to replace the Naira notes in circulation with digital currency, otherwise known as the eNaira, in due course.
The apex bank, through its CBN Director, Corporate Communications Department, Mr Osita Nwanisobi, said the statement released, supposedly during the stakeholders’ engagement on eNaira adoption in Asaba, Delta was “misconstrued” and therefore called on the public to completely disregard it.
Nwanisobi said: “The digital version of the naira is meant to complement the existing currency notes and therefore, will circulate simultaneously as means of exchange and store of value.
“The digital legal tender aside from the safety and speedy features, it will also ensure greater access to financial services by the underbanked and unbanked populace thereby enhancing financial inclusion”.
He therefore urged members of the public and business owners to embrace the digital currency, the eNaira as it offers more possibilities.
Investors King recalls that in the early hours of Saturday, the Delta State Branch Controller of CBN, Mr Godwin Okafor, had revealed that the Paper currency (Naira) will soon be out of circulation, urging citizens to patronise e-Naira.
Godwin had explained that the bank is the market to further educate the people on the use and importance of the digital currency which is fully backed by the apex bank, unlike Bitcoin which has no legal backing.
He had made the statement at the popular Ogbogonogo market, Delta, during the market sensitisation on e-Naira.
“Paper currency will soon be out of circulation because CBN spent money to print money and people abuse the currency in the market, spraying at the occasion, payment of Okada/tricycle and others and CBN is losing”, he had revealed.
“Paper Currency Will Soon be Out of Circulation” – CBN Official
Delta State Branch Controller of Central Bank of Nigeria (CBN), Mr Godwin Okafor, has revealed that the Paper currency, (Naira) will soon be out of circulation, urging citizens to patronize e-Naira.
Mr Godwin explained this at the famous Ogbogonogo market, Delta, during the market sensitisation on e-Naira.
“We are here at the market today to sensitise the market people on the use of e-Naira. It is fully backed by CBN, unlike Bitcoin which has no legal backing,” he said.
“Paper currency will soon be out of circulation because CBN spent money to print money and people abuse the currency in the market, spraying at the occasion, payment of Okada/tricycle and others and CBN is losing.”
In relation to this, Investors King had reported the President’s statement on the importance of the e-Naira to the country’s economy. President Buhari said the launching of the E-Naira makes Nigeria the first country in Africa and one of the first few countries in the world to launch a digital currency.
He further said he expects the currency to enable the government to send direct payments to citizens eligible for government welfare programs as well as foster cross-border trade and assist in moving many more people and businesses from the informal sector into the formal sector, therefore, increasing the tax base of the country.
Further, he explained that being a digital currency, it has the potential to increase Nigeria’s GDP by $29 billion over the next 10 years.
Dr. Aminu Bizi, a CBN e-Naira expert, said Delta was chosen as the second state after Lagos to sensitize market women on the currency.
He said the use of e-Naira was effective, charges free unlike ATM and POS and cannot be hacked by fraudsters.
Secretary to the State Government, Chief Patrick Ukah, praised the CBN for the e-Naira project in his remarks.
He expressed his satisfaction with CBN programs, characterizing e-Naira as a “laudable” initiative that has elevated Nigeria’s position in international finance.
Naira Exchange Rate Dips at Official Market and Black Market
The Nigerian Naira opened the week lower against the United States Dollar at the Investors and Exporters (I&E) foreign exchange window now adopted as the official forex window and also at the black market.
The local currency opened at N417.30 against the United States Dollar before declining by 0.60% to close the day at N421.50/$ at the I&E window. Forex traders at the window transacted forex worth $70.68 million on Monday.
For banks and international money transfer operators, the Central Bank of Nigeria buys US Dollars at N414.75 and sells at N415.75. The apex bank buys and sells Pounds Sterling N508.2761 and N509.5016, respectively. For the European common currency, the Euro, the central bank sold it at N433.0453 and acquired it at N432.0036 a unit.
At the parallel market popularly known as the black market, the Naira was exchanged at N599 for a United States Dollar in Abuja.
Speaking on why the exchange rate is that high, Abu Abdullahi, a currency trader at Zone 4 in Abuja, said demand for the U.S. Dollar is high despite persistent scarcity.
Crude oil extended its gain in the early hours of Tuesday on optimism that China, the world’s largest importer of the commodity, would see substantial demand recovery after the latest data pointed to slowing COVID-19 infections in the hardest-hit areas.
Brent crude oil, the international benchmark for Nigerian crude oil, gained $2.69, or 2.4% to $114.24 a barrel at 5 am Nigerian time. The U.S. West Texas Intermediate (WTI) crude rose $3.71, or 3.4%, to $114.20 a barrel, Investors King understands.
“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.
Finally, Bitcoin and other cryptocurrencies shake off Luna-led decline to pare losses on Tuesday. Luna Foundation Guard (LFG) announced in the late hours of Monday that it was discontinuing Luna Coin and stablecoin (UST) operations to launch a new blockchain protocol that would focus on developers and building in general.
The announcement marked the end of one of the most promising cryptocurrency projects and once again reminds the world of how vulnerable the cryptocurrency space is — regardless of what creators say.
Bitcoin gained 1.99% to $30,366 per coin while Eth, a token of Ethereum, XRP (token of Ripple) and Solana appreciated by 3.15%, 3.25% and 4.39% to close at $2,084.27, $0.431744 and $55.86, respectively.
Finance3 weeks ago
Dollar to Naira Today Thursday, 5 May 2022
Finance4 weeks ago
Kigali to Host the Commonwealth’s Landmark African Anti-corruption Conference
Banking Sector4 weeks ago
FirstBank Wins Best Bank in Nigeria and Best Bank in Digital Transformation Nigeria 2022
Banking Sector3 weeks ago
FY 2021: Unity Bank Grosses N50.28bn in Earnings and N3.33bn in Profit
Banking Sector3 weeks ago
World Earth Day 2022: Unity Bank, RESWAYE Clean Lagos Beach, Plant Trees
Banking Sector3 weeks ago
FirstBank Goes Beyond Banking, Reiterates Commitment To Healthcare Via Pharmacy Credit Facility, Hospital Loans
Banking Sector3 weeks ago
Fidelity Bank Announces 29% Increase in Gross Earnings in Q1 2022
Investment2 weeks ago
72% of North American Quant Fund Managers Struggle to Access High Quality Data