The dollar headed for its steepest three-week slide in more than four years as an increasingly cautious Federal Reserve spurred analysts and investors to reassess forecasts for the greenback.
A Bloomberg index tracking the U.S. currency against 10 major peers climbed from an eight-month low reached Friday, two days after Fed officials unexpectedly cut projections for interest-rate increases to two this year from the four they estimated in December. Macquarie Bank Ltd. and Morgan Stanley, two of the world’s top 10 currency forecasters, are highlighting the risk of more dollar weakness.
“The fact that they didn’t raise rates and wound back expectations for future increases in 2016 has obviously hurt the U.S. dollar,” said Derek Mumford, a director at Rochford Capital Pty in Sydney. “That can continue in the very near term.”
The Bloomberg Dollar Spot Index rose 0.2 percent to 1,185.52 as of 6:28 a.m. in New York, having fallen earlier to 1,180.83, the lowest since June 30. It has dropped 3.7 percent since Feb. 26, poised for the biggest three-week slump since October 2011. The greenback has depreciated at least 0.4 percent against all of its Group-of-10 peers since March 11.
The Fed meeting prompted investors to question whether the dollar’s rally has run out of steam. Bloomberg’s gauge had climbed 37 percent between its 2011 low and the closing peak reached on Jan. 22 of this year, as the promise of superior economic growth and rising interest rates contrasted with sluggish economic activities elsewhere.
“In terms of the relative difference in interest rates, the rally is over,” John Silvia, chief economist at Wells Fargo Securities LLC, said in an interview on Bloomberg Television’s “Countdown” with Manus Cranny and Anna Edwards. “The Fed has said we’re not going to be pushing this game like we were expected too.”
JPMorgan Chase & Co. lowered its year-end forecast for dollar-yen to 103 from 110 the same day. The median estimate is 120 among more than 60 analysts surveyed by Bloomberg.
The dollar was little changed at 111.38 yen Friday, on track for a 2.2 percent slide this week. It reached 110.67 on Thursday, the lowest since October 2014. The greenback gained 0.4 percent Friday to $1.1268 per euro, paring its weekly decline to 1 percent.
“The Fed has become much more dovish — the market realizing maybe the Fed being a little bit more behind the curve,” Dominic Schnider, the head of commodities and Asia-Pacific foreign exchange at UBS Group AG’s wealth-management unit in Hong Kong, said Friday in a Bloomberg Television interview. “That’s simply not good for the dollar, and so we have this generic dollar weakness right now which will not disappear in the very short term.”
While Morgan Stanley and Macquarie agree on the prospects for near-term weakness, they remain dollar bulls.
The greenback will decline over a one-to-three month horizon, after which it will begin climbing again on a resumption of Fed tightening amid looser policy elsewhere, Macquarie strategists Nizam Idris, Gareth Berry and Teresa Lam wrote in a report Thursday.
“The falling USD has the characteristics of a pain trade that seems to have further to run,” Morgan Stanley analysts including Hans Redeker, the global head of currency strategy, wrote in a note the same day . However, “for the USD to experience a long-term trend change requires more than a dovish Fed.”
Buhari Expresses Confidence in Banking Institutions to Tackle Economic Challenges
President Muhammadu Buhari has expressed his confidence in the West African Banking Association (WABA) to tackle economic challenges in the West African region.
The president expressed his trust while receiving a team from WABA, led by its President, Thierno Seydou Nourou Sy, at the State House in Abuja.
The president stated that the sub-region needs to come to an agreement on low access to financial services and recovery from the COVID-19 pandemic.
According to him, the association, founded in 1981, brings together over 250 commercial banks and 15 institutions from across West Africa, and for many centuries, African countries have traded with one another without a formalized and structured system. He, however, noted that over time, global trade had become more complex and organized.
The president expressed optimism that the launch of the African Continental Free Trade Area will mark a watershed moment in the way African countries do business.
“More importantly, we will turn the page in ensuring that we deepen and expand our industrial capabilities by making sure we export less of what we have been endowed with in the primary or raw form, and convert larger portions of these resources into finished materials.
“That will allow us to benefit from the revenue earned from the added value of exporting a finished product,” he said.
“Our ability to overcome the current phase of our development lies in our resolve to work jointly via our regional and sub-regional organizations where we can all reach a common understanding to fight against a common enemy.
“This is one of the reasons I am delighted with the strides ECOWAS has been making towards unanimity and forging alliances with a goal to resolve issues that confront the sub-region.
“I believe that this is also the approach that is being followed in the West African Bankers’ Association and the West African Monetary Union,’’ he added.
While commenting on WABA’s ongoing attempts to synchronize monetary and fiscal policy, the president pushed the organization to find common ground despite the particular macroeconomic challenges that each member-state faces.
He pledged that Nigeria would always be ready to support efforts that are geared towards improving the lives of all its citizens “as long as they do not place us at a disadvantage.”
The WABA President praised Nigeria’s leadership role in the African economy, while also praising President Buhari’s leadership.
“That’s why we are here for counsel and guidance for the financial sector in West Africa,” he said. He further urged the president to be an advocate for the greater inclusion of WABA in the ECOWAS structure.
NGX Sheds 0.13% on Monday to Extend its Decline
The Nigerian Exchange Limited (NGX) extended its decline on Monday as investors exchanged 263,338,835 shares worth N3.549 billion in 4,549 billion.
The market value of all listed equities decreased by N37 billion from N28.562 trillion it closed on Friday to N25.525 trillion while NGX shed 0.13% to close at 52,911.51 index points on Monday.
Jaiz Bank led the most traded stocks with 114007816 shares worth N101,752,697.03. Followed by GTCO’s 12,872,851 shares valued N302,842,620.75. See other details below.
|CONOIL||N 31.15||N 34.25||3.10||9.95 %|
|MRS||N 13.60||N 14.95||1.35||9.93 %|
|MCNICHOLS||N 2.13||N 2.34||0.21||9.86 %|
|ACADEMY||N 1.23||N 1.35||0.12||9.76 %|
|NPFMCRFBK||N 1.87||N 2.02||0.15||8.02 %|
|PRESCO||N 200.00||N 180.00||-20.00||-10.00 %|
|GSPECPLC||N 3.41||N 3.07||-0.34||-9.97 %|
|NEIMETH||N 1.76||N 1.59||-0.17||-9.66 %|
|UACN||N 14.40||N 13.20||-1.20||-8.33 %|
|NEM||N 4.39||N 4.05||-0.34||-7.74 %|
Nigeria Raises Interest Rate by 150 Basis Points to 13%
The Central Bank of Nigeria (CBN) led Monetary Policy Committee on Tuesday unanimously agreed to raise interest rates by 150 basis points from 11.5% to 13% to rein in escalating consumer prices.
The apex Governor, Godwin Emefiele disclosed this while speaking to the media on Tuesday, May 24th, 2022.
In 2020, the committee cut interest by 50 basis points to 11.5% in September 2020 to encourage borrowing and deepen new investment to stir growth and halt the plunge in economic productivity during the peak of COVID-19.
The nine-member committee voted unanimously to keep Monetary Policy Rate (MPR) at 13% and others as follow:
- The asymmetric corridor of +100/-700 basis points around the MPR was retained
- CRR was retained at 27.5%
- While Liquidity Ratio was also kept at 30%
The increase may not be unconnected to Nigeria’s high inflation rate of 16.82% in April. The committee is now projecting an aggressive increase in the inflation rate due to the forthcoming general election.
Emefiele said the MPC is suspicious “there might be an aggressive accretion of inflation”. Therefore, to prevent the looming inflation, he said the committee had to raise the interest rate by 150 basis points.
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