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Bonds Jump With Gold as Dollar Sinks on U.S. Retail Sales, PPI

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Bonds jumped, gold rallied and the dollar weakened after reports showed sales at U.S. retailers were little changed in July and wholesale prices unexpectedly fell by the most in almost a year.

Treasury 10-year note yields dropped below 1.5 percent after the data, gold climbed the most in two weeks and the dollar dropped versus most of its major counterparts. The MSCI All Country World Index of stocks rose to a one-year high, boosted by increases in oil prices. Norway’s krone led the currencies of crude-exporting nations higher.

Equities and bonds are both higher on the week, buoyed by optimism central banks will retain or enhance supportive policies as the economy expands, but at a subdued pace. Data out of Europe Friday showed a 0.3 percent increase in euro-area gross domestic product, with growth in Italy grinding to a halt. Monetary authorities in Australia, New Zealand and the U.K. cut benchmark interest rates to records this month, while the Bank of Japan and European Central Bank are using unprecedented stimulus to spur expansion. In oil, speculation that informal OPEC talks next month will stabilize the market buoyed prices.

Bonds

Treasury 10-year note yields sank seven basis points to 1.49 percent as of 8:42 a.m. New York time as bonds surged around the world.

U.K. gilts extended a fourth weekly gain, as the Bank of England’s first week of its expanded bond buying plan drew to a close. The central bank has left its quantitative-easing shopping list broadly unchanged for next week, even after it failed to attract enough sellers of gilts due in more than 15 years to hit its purchase target at an operation on Tuesday. The yield on 10-year gilts touched a record-low 0.508 percent.

Spanish and Italian government bonds also headed for their fourth weekly advance. The yield on Spain’s 10-year security was at 0.93 percent, after touching a record-low 0.913 percent on Thursday.

China’s 10-year bonds yielded 2.66 percent, the least in data going back to 2006.

Germany’s economy expanded 0.4 percent in the second quarter, slowing from a 0.7 percent expansion in the previous three months, data showed Friday. In Italy, preliminary figures showed gross domestic product unchanged, disappointing forecasts for growth of 0.2 percent.

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.

Forex

Nigeria’s Annual Remittance Inflow Estimated at $24 Billion -CBN

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The Central Bank of Nigeria (CBN) has started focusing on how to better harness Nigeria’s huge diaspora remittances as seen in recent foreign exchange policy geared towards stimulating growth and fast-tracking economic recovery with foreign inflows.

On Thursday, the apex bank said it adjusted forex policy to service the economy with diaspora remittances and curb the excesses of few unscrupulous forex dealers.

In an effort to boost remittance inflows and foster an environment that would enable faster, cheaper, and more convenient flow of remittances back to Nigeria, the Central Bank of Nigeria, on November 30, 2020, announced a new policy initiative, which would help to support these objectives,” Godwin Emefiele stated.

Speaking further, he said, “Given the estimated annual remittance inflow of close to $24bn, which could help in improving our balance of payment position, reduce our dependence on external borrowing and mitigate the impact of COVID-19 on foreign exchange inflows into the country, the CBN sought to find ways to support improved remittance inflows into the country through official channels.

Based on this premise, we analyzed data on IMTO inflows into the country over the past year, and through our investigations discovered that some IMTOs, rather than compete on improving transaction volumes and create more efficient ways for Nigerians in the Diaspora to remit funds, resorted to engaging in arbitrage arrangements on the naira dollar exchange rate, which to a large extent resulted in a significant drop in flows into the country. It also encouraged the use of unsafe unofficial channels, which also supported diversion of remittance flows meant for Nigeria, thereby undermining our Foreign Exchange management framework.

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CBN Forced Speculators, Hoarders to Sell Dollar Lower

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The Central Bank of Nigeria’s new forex policy has forced many speculators and hoarders at the Nigerian parallel market popularly known as the black market to start bringing out their forex at an even lower price.

The Naira to United States Dollar exchange rate moderated from N500 to N470 earlier this morning across the nation’s black market.

Similarly, the local currency exchanged at N620 to a British Pound, an improvement from N640 it was sold on December 1, 2020.

The story is not different against the European common currency as it gained slightly to N570, up from N580 it sold on Tuesday.

The improvements recorded against global counterparts was after the CBN directed that henceforth recipients of foreign remittance can now receive such fund in foreign currency (US Dollar) in cash or through an ordinary domiciliary account.

This means the apex bank planned to inject $20 billion estimated diaspora remittances per year into the real sector of the economy to force hoarders to sell their dollars or lose substantially and also to curb forex dealers in the habit of buying forex directly from the recipient’s domiciliary account because of old CBN policy that restricted them from withdrawing foreign currency in cash.

With this old policy out of the way, recipients of foreign remittances can now withdraw foreign currency and exchange it at any of the registered bureau de change operators across the nation at N392 to a US dollar. The bureau de change rate set by the central bank.

Investors King expects the policy to fast track the recovery process and enhance economic activity across the board, especially at a time when importers are looking for forex to bring in goods in order to meet the usual December high demand.

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Naira Exchange Rate Improves as CBN Plans to Flood Economy With $20 Billion Diaspora Remittances

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The Naira to US Dollar exchange rate improved by N10 to N490 on Tuesday following the Central Bank of Nigeria’s new directive that allows recipients of diaspora remittances to receive their fund in foreign currency (US Dollar) or via their ordinary domiciliary account.

The move was after the apex bank blamed the parallel market for the wide foreign exchange rate and cautioned analysts for using speculative rates as the real Naira/US dollar rate.

Therefore, the apex bank decided to inject $20 billion annual diaspora remittances into the real sector of the economy and hurt the activities of unscrupulous individuals at the parallel market.

Investors King expects this to gradually moderate the nation’s foreign exchange rate against global counterparts, deepen business activities and fast track economic recovery.

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