A gauge of the dollar rose for a fourth day as traders awaited Federal Reserve Chair Janet Yellen’s speech this week for clues on the path of U.S. interest rates.
The greenback strengthened versus all its developed-market peers as futures traders placed a 28 percent probability of a U.S. interest-rate increase next month and a 54 percent chance by December. A JPMorgan Chase & Co. gauge of global exchange-rate volatility was at a one-month high before Yellen’s speech slated for Friday at the annual monetary policy symposium in Jackson Hole, Wyoming.
“Yellen has to take a clear hawkish stance to justify sustained dollar strength beyond this weekend,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. in Singapore. “While we expect the dollar to rebound in coming days, as recently built short-dollar positions are likely to be squared off ahead of the symposium, the currency could weaken again on even a subtle shift in Yellen’s views.”
A short position is a bet an asset’s price will drop.
The Dollar Spot Index added 0.1 percent as of 6:34 a.m. in London, following a three-day, 0.7 percent gain. The greenback bought 100.39 yen, compared with 100.24 in New York. It advanced 0.1 percent to $1.1294 per euro.
The JPMorgan gauge of price swings rose to 10.22 percent in New York, the highest since July 26.
Hedge funds and other money managers reduced net-bullish wagers on the dollar for the second straight week, according to data from the Commodity Futures Trading Commission. Bets that the dollar will rise outnumbered bearish positions by 125,117 in the week to Aug. 16, down from 144,268 a week earlier.
“There’ll be a greater risk of a bit of profit-taking in U.S. dollar shorts going into Jackson Hole and a bit of a bounce in the U.S. dollar,” said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. “The market is positioned for a dovish statement and the risk is that it disappoints.”
Naira Appreciates Slightly to N1,542.58/$ at NAFEM
The Naira appreciated marginally against the United States dollar, closing at N1,542.58/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Wednesday.
This modest gain represents a 2.9 percent appreciation from the previous day’s rate of N1,598.54, highlighting a nuanced fluctuation in the currency’s value.
According to data sourced from the FMDQ Securities Exchange, a platform overseeing FX trading in Nigeria, the Naira’s journey throughout the trading day was marked by an intra-day high of N1,755 and a low of N1,050.
Moreover, the total foreign exchange turnover surged to $172.14 million, indicating a 47 percent increase from the previous day.
Despite the Naira’s marginal gain at NAFEM, concerns persist regarding the widening gap between the official and parallel market rates.
The Naira’s depreciation to N1,900 against the dollar in the parallel market before it moderated to N1,687 later in the day.
Analysts and Bureau De Change operators foresee further pressure on the Naira, with predictions of a potential all-time low of 2,000/dollar at the parallel market in the coming weeks.
The demand for the greenback continues to fuel volatility, prompting regulatory actions from entities like the Economic and Financial Crimes Commission (EFCC) and the Central Bank of Nigeria (CBN) to curb speculative activities.
As stakeholders monitor the currency’s trajectory, the CBN’s efforts to address forex liquidity challenges and stabilize the Naira remain under scrutiny amidst evolving market dynamics.
Police and EFCC Personnel Raid Bureau De Change Outlets in Ibadan’s Sabo Area
In a concerted effort to curb illicit currency dealings and stabilize the nation’s currency, Nigerian security operatives, including police and Economic and Financial Crimes Commission (EFCC) personnel, launched a raid on Bureau De Change (BDC) outlets in Ibadan’s Sabo area.
Sabo, a prominent district in Ibadan, the capital of Oyo State, serves as a central hub for currency exchange activities in the region.
Videos circulated on social media platforms captured the dramatic scene as armed security personnel and their convoy descended on the bustling Sabo Road.
The raid comes amidst growing concerns over the depreciation of the Nigerian naira, which hit record lows against major foreign currencies, including the dollar.
Sources revealed that the naira’s value reached alarming levels, with exchanges as high as N1980 to $1 on the parallel market and N1780 on the official market.
President Bola Tinubu’s administration has intensified efforts to crack down on individuals involved in currency racketeering, aiming to restore stability to the nation’s economy.
The clampdown signals a firm stance against illegal currency trading and serves as a deterrent to those engaging in speculative activities.
While the raids may disrupt illicit operations, they also underscore the government’s commitment to restoring confidence in the financial sector and promoting transparency in currency exchange practices.
Rand Surges as South Africa Taps into Reserves to Alleviate Debt Burden
South Africa’s currency, the rand, surged against major currencies as Finance Minister Enoch Godongwana announced the country’s decision to tap into its reserves to tackle its debt burden.
The move revealed in the budget presentation before the upcoming critical elections aims to stabilize South Africa’s economy while bolstering social spending.
Godongwana outlined plans to restructure reserves held at the central bank, releasing a substantial sum of 150 billion rand ($7.9 billion) over three years.
This strategic maneuver targets the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), which has seen a remarkable increase in paper profits to 507.3 billion rand.
Investors responded positively to the announcement with the rand strengthening by as much as 0.8% against the dollar.
The decision to access reserves to manage debt levels and fund critical sectors like education, healthcare, and welfare underscores South Africa’s commitment to financial stability and social development amid challenging economic conditions.
While the move signals short-term relief and positive market sentiment, economists remain cautious, emphasizing the need for sustainable growth strategies independent of reserve depletion.
The utilization of reserves is a critical measure aimed at steering South Africa through its fiscal challenges and ensuring economic resilience in the face of uncertainty.
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