Forex

Credit Suisse Turns Bearish on U.S. Dollar Amid Fears of Monetary Policy Impotence

Published

8 years ago

February 11, 2016

Credit Suisse has turned bearish on the U.S. dollar versus the other two G3 currencies for the first time since the greenback’s scintillating rally began in the middle of 2014.

The bank’s currency team, led by Global Head of FX Strategy Shahab Jalinoos, sees EURUSD rising to 1.17 and USDJPY falling to 110 over the next three months.

Concerns about monetary policy impotence—that central bankers will be unable to successfully reflate their economies—are becoming embedded in currency valuations, according to the analysts.

There’s “a growing fear that monetary policy is now ‘pushing on a string,’ at least from an FX perspective,” they wrote. “EUR and JPY are materially stronger now than levels before ECB chief Draghi hinted at more easing and the BoJ introduction of negative rates in January.”

Options traders doubt that the Bank of Japan in particular will be able to keep the yen on its back foot going forward—a development that would bode ill for its attempts to win a decades-long battle against deflation.

“Risk reversal skews are now generally bid for JPY again in the same manner as they were prior to the start of QQE in 2012–the risk of large JPY sell-offs linked to BoJ policy is gradually being priced out,” wrote Jalinoos & Co.

Meanwhile, in part due to fears that monetary stimulus from the ECB and BoJ will fail to bear fruit, investors are skeptical of the Fed’s ability to continue decoupling policy from that of other major central banks.

The much-ballyhooed divergence trade—which analysts at Credit Suisse were quite bullish on in November—is over, according to Jalinoos’ team, which highlighted “an obvious end to the monetary policy divergence trade when looking at rate differentials.”

“It goes without saying that the market is no longer expecting more Fed rate hikes in 2016,” the strategists concede.

The bulk of the initial move in USDJPY that started near the end of 2012 was predicated on presumed monetary divergence, with Prime Minister Shinzo Abe pledging easing on this front, while Ben Bernanke would soon set off the “taper tantrum” in May 2013.

A situation in which the Bank of Japan’s stimulus has run its course—at least on the currency—and expectations for negative rates in the United States continue to mount would send ripples through the entire foreign exchange complex and potentially other asset classes, to boot.

“A violent and persistent turnaround in U.S. rate expectations would certainly classify as the type of scenario that would upset the apple cart for most USD versus G10 forecasts, but especially for USDJPY,” the strategists wrote. “The market is not well positioned psychologically for this outcome.”

As the yen is typically viewed as a risk-off or safe haven currency—and because the USDJPY pair has tracked the S&P 500 fairly closely since Abe’s rise in the polls began—equities could also be adversely affected by a period of relative strength in the Japanese currency.

Bloomberg

Up Next

Naira Hits Record Low of N325 Against Dollar

Don't Miss

Naira Declines to N303 a Dollar as Scarcity Intensifies

Samed Olukoya

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.

Comments

Naira

Dollar to Naira Black Market Today, April 25th, 2024

As of April 25th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,300 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

3 hours ago

April 25, 2024

Samed Olukoya

Naira to Dollar Exchange- Investors King Rate - Investors King

As of April 25th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,300 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 N1,260 and sell it at N1,250 on Wednesday, April 24th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined 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: N1,300
Selling Rate: N1,290

Naira

Dollar to Naira Black Market Today, April 24th, 2024

As of April 24th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,260 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

1 day ago

April 24, 2024

Samed Olukoya

As of April 24th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,260 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 N1,250 and sell it at N1,240 on Tuesday, April 23rd, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined slightly 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: N1,260
Selling Rate: N1,250

Naira

Nigeria’s Naira Dips 5.3% Against Dollar, Raises Concerns Over Reserve Levels

Published

1 day ago

April 24, 2024

Samed Olukoya

Nigerian Naira depreciated by 5.3% against the US dollar as concerns over declining foreign reserves raise questions about the central bank’s ability to sustain liquidity.

The local currency has now declined for the third consecutive day since the Naira retreated from its three-month high on Friday shortly after Bloomberg pointed out that the Naira gains were inversely proportional to foreign reserves’ growth.

According to data from Lagos-based FMDQ, the naira’s value dropped precipitously, halting its recent impressive performance.

The unofficial market saw an even steeper decline of 6%, extending the currency’s retreat over the past three trading days to a staggering 17%.

Abubakar Muhammed, Chief Executive of Forward Marketing Bureau de Change Ltd., expressed concerns over the sharp decline, highlighting the insufficient supply of dollars in the market.

Muhammed noted that despite a 27% increase in traded volume at the foreign exchange market on Monday, the supply remained inadequate, forcing the naira to soften further while excess demand shifted to the unofficial market.

The dwindling foreign exchange reserves have been a cause for alarm, with Nigeria’s gross dollar reserves steadily declining for 17 consecutive days to reach $32 billion as of April 19, the lowest level since September 2017.

This worrisome trend has raised questions about the adequacy of dollar inflows to rebuild reserves, especially after the central bank settled overdue dollar obligations earlier in the year.

Samir Gadio, Head of Africa Strategy at Standard Chartered Bank, pointed out that while the naira had been supported by onshore dollar selling, the rally was likely overextended.

Gadio warned that the emergence of a dislocation in the market, with domestic participants selling dollars at increasingly lower spot levels was unsustainable and necessitated a correction.

The central bank’s efforts to stabilize the naira have been evident with interventions aimed at improving liquidity.

However, the effectiveness of these measures remains uncertain, particularly as the central bank offered dollars to bureau de change operators at a rate 17% below the official rate tracked by FMDQ.

Analysts, including Ayodeji Dawodu from Banctrust Investment Bank, foresee further challenges ahead, predicting that the naira will likely stabilize around 1,500 against the dollar by year-end.

Dawodu emphasized the importance of stabilizing the currency to attract strong foreign capital inflows, underscoring the significance of sustainable monetary policies in Nigeria’s economic recovery.

As Nigeria grapples with the repercussions of the naira’s depreciation and declining foreign reserves, policymakers face mounting pressure to implement measures that ensure stability and foster confidence in the economy.

The road ahead remains uncertain, with the fate of the naira intricately tied to Nigeria’s ability to address underlying economic vulnerabilities and bolster investor trust.