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Dollar Climbs, Commodities Decline as Traders Assess Fed Timing

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Bureau Of Engraving And Printing Prints New Anti-Counterfeit 100 Dollar Bills

The Fed effect reverberated through global markets, pushing the dollar up and commodities down as traders increased bets on higher borrowing costs in the world’s largest economy.

The dollar climbed against all of its major peers, while global stocks were set for the longest slide since June after hawkish comments from Federal Reserve officials last week. Oil slumped below $47 a barrel as metals retreated. The S&P 500 Index advanced after a report showing further improvement in consumer purchases underscored the strength of the U.S. economy. Treasury yields retreated after Friday’s surge. Japanese shares led gains among the world’s biggest equity markets after central bank chief Haruhiko Kuroda reiterated a pledge to boost monetary stimulus if needed.

Almost unthinkable two months ago, the prospect of a rate increase next month is now back on the table, with the probability rising to 42 percent from 24 percent in the space of a week. Fed Chair Janet Yellen said Friday in Jackson Hole the case for an increase is getting stronger, while Vice Chairman Stanley Fischer indicated a tightening is possible at the next review. Those comments will sharpen the focus on Friday’s monthly U.S. payrolls report to gauge whether the economy is strong enough to sustain higher borrowing costs.

“If they manage to raise rates that will be relatively good news but it does entail a little bit more tightening in the system,” said Samy Chaar, a Geneva-based strategist at Lombard Odier, which manages about $170 billion.

A report on Monday showed American consumers boosted spending for a fourth month in July, bolstered by stronger income gains, sending the biggest part of the U.S. economy to a solid third-quarter start. The 0.3 percent rise matched forecasts and followed a 0.5 percent increase the prior month that was revised up, Commerce Department data showed. Incomes rose 0.4 percent, the most in three months. Payrolls data on Friday are forecast to show 180,000 jobs were added in August, according to economists.

Stocks

The S&P 500 rose 0.1 percent at 9:30 a.m. in New York.

The Stoxx Europe 600 Index retreated 0.3 percent. A gauge of auto makers posted the biggest decline, while sliding oil prices dragged energy producers lower. The volume of shares changing hands today was 70 percent lower than the 30-day average as U.K. markets were closed for a holiday.

The MSCI Emerging Markets Index fell 0.8 percent as almost two stocks declined for every one that advanced.

Fischer reiterated in an interview on CNBC that the possibility exists for two rate increases this year, starting as soon as September.

“The market has realized that the Fed meant it when it said two hikes are possible this year, repricing the September Fed hike chance,” said Aurelija Augulyte, a strategist at Nordea Markets in Copenhagen. It’s negative for “dollar-financing needs and puts pressure on commodity prices and hence, emerging-market exports,” she said.

Japanese stocks advanced as a weaker yen boosted the outlook for exporters. The Topix index climbed 2 percent as Toyota Motor Corp. and Mazda Motor Corp. jumped at least 3.9 percent.

Currencies

The Bloomberg Dollar Spot Index gained 0.3 percent, after surging 0.8 percent on Friday. The yen fell 0.4 percent, after sliding 1.3 percent in the last session, and the euro fell to a two-week low. The pound weakened 0.5 percent.

The MSCI Emerging Markets Currency Index fell 0.8 percent, with South Korea’s won sliding 1 percent. Most of the central banks that are tracked by Bloomberg in both Asia and Europe have cut interest rates this year.
South Africa’s rand weakened 1.1 percent, after a 5.9 percent weekly loss. The currency posted its steepest slide of the year last week on concern that a stand-off between South African Finance Minister Pravin Gordhan and the country’s police could lead to Gordhan’s ouster.

Commodities

The Bloomberg Commodity Index, which measures returns on raw materials is down a fourth day, trimming a monthly advance as oil and precious metals fell.

West Texas Intermediate crude slid 1.4 percent to $46.98 a barrel amid doubts producers will agree on a deal to stabilize the market when suppliers meet next month for informal talks. A similar proposal was made in February, but a meeting in April ended with no final accord.

“The likelihood of them actually agreeing to some kind of production freeze is relatively low,” Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney, said in a Bloomberg television interview.

Gold extended its longest losing run since May to a 7th day, falling as much as 0.5 percent after losing 1.5 percent last week. Silver touched the lowest price in almost two months.

Bonds

Germany’s benchmark 10-year bond yield increased as much as four basis points to minus 0.035 percent, before being one basis point higher at minus 0.06 percent. The yield on similar-maturity French bonds was one basis point higher at 0.178 percent, having jumped earlier by four basis points.

Euro-area bonds are also coming under pressure with Spain’s acting Prime Minister Mariano Rajoy set to face a confidence vote Tuesday, and governments set to reissue debt after a summer lull that saw Germany the sole issuer last week. Countries in the region may sell about 30 billion euros ($34 billion) this week, according to Commerzbank AG.

“We treat the market rather defensively over the coming days and weeks” partly due to “heavy supply and Fed repricing,” Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris, wrote in a client note.

The yield on 10-year Treasuries fell three basis point to 1.60 percent, after jumping six basis points to a two-month high in the last session. Fed funds futures showed there is a 65 percent chance that Yellen will raise interest rates by year-end.

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.

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Naira

Naira Gains 1.58 Percent to N416 at Official FX Market, Bitcoin, Other Cryptocurrencies Plunge

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Naira Dollar Exchange Rate - Investors King

The Nigerian Naira gained 1.58 percent or N7.56 against the United States Dollar at the official forex market on Wednesday.

The local currency opened the day at N423.56 to a US Dollar before improving in value to N416 against the greenback. At the official forex window managed by the FMDQ Group, investors traded $114.95 million on Wednesday.

The improvement in Naira value was after the market had digested the Central Bank of Nigeria’s currency adjustment. The central bank had adjusted the Naira to Dollar exchange rate by N2 from N411 to N413 on Friday, leading to devaluation outcry across Africa’s largest economy.

On Friday, the Naira plunged to as low as N435 against the United States Dollar at the official forex trading market and N575 at the unregulated parallel market, popularly known as the black market, before moderating to N416.

Meanwhile, bitcoin and other cryptocurrencies plunged across the board. Bitcoin depreciated by 7.16 percent to $43,058 per coin in the last 24 hours. The decline does not stop there as the second most capitalised digital asset, Eth dipped by 9.77 percent to $3,441.

Solana, Ripple (XRP), Luna and Cardano (ADA) lost 11.48 percent, 8.13 percent, 9.5 percent and 8.6 percent, respectively.

The decline was after the US Federal Reserve minutes of December 14 – 15 meeting released on Wednesday revealed that policymakers are planning to raise interest rates as early as March 2022 to curb escalating inflation rate. Generally, hawkish monetary policy is negative for cryptocurrency as it drags on capital inflow into the space and encourages investors to look into more stable assets for higher interest rates.

According to The Wall Street Journal, the “Federal Reserve officials at their meeting last month eyed a faster timetable for raising interest rates this year, potentially as soon as in March, amid greater discomfort with high inflation.

“Minutes of their Dec. 14-15 meeting, released Wednesday, showed officials believed that rising inflation and a very tight labor market could call for lifting short-term rates “sooner or at a faster pace than participants had earlier anticipated.”

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Naira

Naira Opens 2022 at N426.25 Against the United States Dollar at Official Forex Window

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Enaira launching in Abuja - Investors King

The Nigerian Naira opened the new year at N426.25 against the United States Dollar on Tuesday, January 4, 2022, at the official foreign exchange window managed by the FMDQGroup.

The local currency plunged to N435 against the US Dollar on Friday after the Central Bank of Nigeria (CBN) adjusted its Naira to Dollar exchange from N411 to N413.49. The adjustment is in line with Godwin Emefiele, governor of the CBN, statement that the country operated a managed-float exchange policy.

Naira pared losses against the US Dollar on Tuesday after forex traders, speculators and hoarders might have analysed CBN forex action and interpreted it as the usual adjustments.

At the unregulated parallel market known as the black market, the Naira plunged to N570 against the United States Dollar on January 4th, 2022. Despite the Central Bank of Nigeria (CBN) discouraging patronage at that section of forex, many Nigerians still relied on the black market for their forex needs.

However, the adjustment may not be unconnected to the change in Nigeria’s economic fundamentals. For instance, the nation’s foreign reserves used to back the Naira have been on a downward trend since hitting $41.8 billion on October 29, 2021. Presently, the reserves stood at $40.5 billion. This is despite oil prices trading at almost $80 a barrel, the highest in recent years.

But because of Nigeria’s inability to improve its production process, lower cost of production and generally increase crude oil output, it has failed to take advantage of the surge in oil prices. Therefore, the CBN adjusted Naira to Dollar exchange rate to reflect the nation’s economic reality of insufficient forex and also enable it meet demands.

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Naira

Dollar to Naira Today December 23, 2021

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Naira Dollar Exchange Rate - Investors King

Investors King will present the latest rate of the Dollar to Naira, both at the official market and the parallel market. 

How much is the exchange rate of Dollar to Naira today?

Below is the performance of the Naira against the dollar, as recorded on Wednesday 22nd December 2021:

Dollar to Naira at the Black Market

On Wednesday, the black market saw the dollar being bought at a rate of N562 per dollar, and then sold at N565 per dollar.

Dollar to Naira at the Official Fx Window

The Dollar to Naira rate as at the close of business on Wednesday remained the same as the rate on Tuesday, settling at N415.10 per dollar, according to the Investors and Exporters window where the Naira is traded officially.

Wednesday’s opening saw the Dollar to Naira rate sit at N414.04 per dollar, but by Thursday the opening rate recognised a marginal rise to sit at N413.77 per dollar.

The Spot rate and Forward rate of the Dollar to Naira started to take shape again on Wednesday, returning to rates which for a long time were considered to be the usual for both rates.

The Spot rate traded at a very recognisable high of N404 per dollar, maintaining the low of N444 per dollar which it has seen for most, if not all of this week. The Forward rate has seen multiple fluctuations this week, unlike the Spot rate which has remained largely stable.

The Forward rate recorded a high of N411.35 per dollar, which is similar to a rate at which it sat consistently a few weeks back. It also recorded a highly familiar low of N453 per dollar, also from a few weeks ago.

The official daily turnover of the dollar on Wednesday sat at $215.29 million, more than $100m lower than the turnover recorded on Tuesday.

Heading into the festive period, this week has been one of consistency for the Dollar to Naira at the official fx window. The Naira maintained a similar range this week in all its openings and closing, not going beyond N413 – N415 per dollar.

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