Forex

Forex Weekly Outlook July 4 – 8

Published

8 years ago

July 2, 2016

Post-Brexit has not only changed the way investors and businesses approach the markets, but also have up the level of uncertainty and wariness of financial market participants. Last week, the US final GDP showed that the economy rose at a 1.1 percent annualized rate in the first quarter, better than 0.8 percent previously estimated. While both consumer confidence index and manufacturing sector showed reasonable improvement, yet the dollar lost substantial ground against its counterparts, partly due to the Federal Reserve’s decision to delay rate hike, and perhaps that explained the level of uncertainty of the financial markets post-Brexit.

Another important factor to consider going forward is the global political system — the US presidential election, the Japanese election, the UK election and the on-going Australia election are key determinants of market direction as investors and businesses are expected to make adjustments to their investments and business decisions to accommodate possible changes in policies peradventure incoming administration deem it fit.

This week, traders are also expected to start pricing in the possibility of Bank of England cutting interest rates further, after the governor of the Bank of England Mark Carney said on Friday that “it is now clear that uncertainty could remain high for a while — the economic outlook has weakened and necessitate some monetary easing over the summer.” Hence, caution is advised. This week the EURUSD, AUDJPY and USDJPY top the list. Lets start;

EURUSD

There is no doubt that the US economy has rebounded from 38,000 non-farm payrolls recorded in May, what is uncertain is to what extent. For instance, the manufacturing sector improved significantly to its highest in a year, while unemployment claims surged 1k last week. But the Euro 19-nation single currency on the other hand is entangled in post-Brexit gloomy outlook with uncertainty hanging over its head, although the US dollar lost part of its gains last week I believed its largely due to a delay in the rate decision and that the Euro currency is presently not attractive enough to topple the US dollar gains just yet.

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If the pair failed to remain below 1.2304 resistance level, a sustained break will nullify this analysis as it would have confirmed an important bullish pattern. Otherwise, I am bearish on the EURUSD and expect a break of 1.1090 to open up 1.0714 target. Non-farm payroll report is due on Friday.

AUDJPY

The Aussie dollar attracted substantial buyers last week to gain back part of its losses against the Japanese yen. While the outlook seems okay without factoring in China’s weak manufacturing report released on Friday and chaotic electoral process that left the country without a conclusive election result last week, the pair remains bearish as long as 78.14 resistance level holds. Especially knowing the potential of the Japanese yen as a safe haven asset in an eventful period like this, I remain bearish on AUDJPY with 73.544 as the target.

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Again Japan’s manufacturing sector, consumer confidence and trade balance improved well enough to reinforce the sort of demand needed to weigh on the pair, since weak China’s manufacturing sector will reflect on Aussie dollar this July anyways. It is widely expected that the Reserve Bank of Australia will leave its rate unchanged on Tuesday.

USDJPY

As long as global risks remain high, global investors will continue to sell-off this pair to contain risk exposure. Even with 2 percent inflation target gradually becoming elusive, Japanese yen remains attractive.

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This pair remains on the downside as long as 104.25 resistance level holds.

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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.

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Black Market Rate

EFCC Raids Wuse Zone 4 Market, Clashes with Bureau De Change Operators

Published

19 hours ago

May 8, 2024

Samed Olukoya

Tensions escalated in the bustling Wuse Zone 4 Market as operatives from the Economic and Financial Crimes Commission (EFCC) conducted a raid targeting Bureau De Change (BDC) operators on Tuesday.

The raid, intended to curb illegal currency trading and enforce regulatory compliance, quickly turned confrontational, resulting in clashes between the EFCC agents and currency traders.

Eyewitnesses reported scenes of chaos as the operatives attempted to apprehend BDC operators, who resisted the arrests vehemently.

The situation escalated to the point where gunshots were fired, and vehicles belonging to the EFCC were damaged.

Two currency traders, speaking anonymously, confirmed the events, citing frustration and desperation among the traders as the underlying cause of the resistance.

According to one witness, who requested anonymity for fear of reprisal, the traders’ reaction was fueled by their perception that the EFCC’s arrests were becoming excessively frequent and motivated primarily by a desire to extort money from them.

“Yesterday (Monday), they arrested traders, but they faced resistance today. People are getting tired and desperate,” the witness explained.

Another trader echoed similar sentiments, warning that continued raids by the anti-corruption agency could escalate into violence and potentially lead to fatalities. “If this thing continues like this, that means they would kill people,” the trader cautioned.

The growing frustration among traders stems from their belief that the EFCC’s actions, which often culminate in monetary fines, serve more as revenue-generating measures than effective regulatory enforcement.

The EFCC’s resurgence in raiding activities is part of its broader efforts to stabilize the Nigerian naira and combat illegal currency speculation.

In recent weeks, the commission has intensified its crackdown on suspected currency speculators and fraudulent foreign exchange practices.

However, despite these efforts, the naira has continued to depreciate, reflecting the challenges facing Nigeria’s foreign exchange market.

Traders at the Wuse Zone 4 Market highlighted the market’s volatility, with fluctuations in exchange rates making it increasingly difficult to predict trading outcomes. One trader, identified as Malam Yahu, expressed concern over the market’s instability and the challenges it poses for traders.

“Right now, the market is just fluctuating, and the naira is not stable at all,” he lamented. Yahu highlighted the impact of the EFCC raids on trading activities, noting how traders refrained from transactions to avoid potential losses.

At the official market, data from the FMDQ exchange securities revealed a sharp depreciation of the naira, raising concerns about rapid fluctuations and market volatility.

The intraday high and low of the naira against the dollar further underscored the challenges facing Nigeria’s foreign exchange market.

As the EFCC continues its crackdown on illicit currency trading, the clashes in the Wuse Zone 4 Market serve as a stark reminder of the underlying tensions and frustrations prevalent among currency traders.

The agency faces the daunting task of balancing enforcement actions with addressing the root causes of illegal trading, amidst ongoing challenges in Nigeria’s foreign exchange market.

Forex

Nigerian Companies Settle Dollar Debts as Central Bank Reforms Bolster Forex Liquidity

Published

20 hours ago

May 8, 2024

Samed Olukoya

In a significant development for Nigeria’s corporate landscape, several major companies have begun to settle their long-standing dollar debts following the Central Bank of Nigeria’s (CBN) recent reforms that bolstered dollar supply.

The reforms have provided much-needed relief to businesses grappling with forex scarcity and overdue obligations.

Among the notable firms taking advantage of the improved forex liquidity are MTN Nigeria Communications Plc, BUA Foods Plc, and Cadbury Schweppes Overseas Ltd.’s Nigeria unit.

These companies, some of the largest players in Africa’s most populous nation, have reported that they are now able to access dollars to meet their foreign currency obligations, marking a stark reversal from previous struggles with forex shortages.

MTN Nigeria, the country’s leading mobile operator, disclosed that it utilized the enhanced liquidity in the forex market to significantly reduce its letters of credit obligations by 41.6%, slashing it down to $243.4 million from $416.6 million in December.

Chief Financial Officer Modupe Kadiri emphasized this move as a strategic measure to mitigate losses during an investor conference call last week.

The Central Bank of Nigeria’s reform measures, implemented since the beginning of the year, have been instrumental in driving this positive change. These measures include raising the benchmark interest rate by 600 basis points to attract capital inflows and abandoning the currency’s peg, allowing the market to determine the exchange rate of the naira.

After years of unconventional currency management that deterred investors and exacerbated forex scarcity, these reforms have injected new life into Nigeria’s forex market.

According to Tatonga Rusike, a sub-Saharan Africa economist at Bank of America Corp., portfolio flows have responded positively to the reforms, leading to a substantial increase in average daily forex turnover, which has more than doubled from 2023 lows.

Recent data from Chapel Hill Denham indicates a remarkable surge in dollar liquidity, with a 90% jump to $160.8 million on Tuesday compared to the previous day.

Also, the central bank’s proactive approach, including selling dollars to money traders to enhance distribution to retail users, has further contributed to the improved forex liquidity environment.

The positive impact of increased dollar liquidity is evident across various sectors of the Nigerian economy.

BUA Foods, the country’s largest food and beverage company, reported a 6% reduction in debts during the first quarter of this year, attributed to improved dollar availability.

Similarly, Cadbury Nigeria has been able to fulfill all its dollar requirements from the official market since the beginning of the year, leading to a drop in local-currency cash reserves.

Economists and industry experts view the enhanced forex liquidity as a welcome development that provides companies with a much-needed reprieve to settle debts and navigate the effects of currency devaluation.

Adetilewa Adebajo, economist and chief executive at Lagos-based CFG Advisory, emphasized the importance of sustaining liquidity to support the turnaround desired by companies.

He stressed the need for positive real rates, matching interest rates with inflation, and fiscal responsibility to ensure continued economic stability and growth.

As Nigerian companies take advantage of improved forex liquidity to address long-standing financial challenges, the success of the central bank’s reforms will be closely monitored, with hopes for sustained liquidity and economic recovery in the months ahead.

Naira

Black Market Dollar to Naira Exchange Rate Today 8th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 8th, 2024 stood at 1 USD to ₦1,440.

Published

21 hours ago

May 8, 2024

Samed Olukoya

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 8th, 2024 stood at 1 USD to ₦1,440.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,430 and sold it at ₦1,420 on Tuesday, May 7th, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in the black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

Buying Rate: ₦1,440
Selling Rate: ₦1,430

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.