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Dollar Strengthens for Second Day as Treasury Yields Rise on Oil

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Dollar
  • Dollar Strengthens for Second Day
  • Treasury Yields Rise on Oil

The dollar advanced for a second day as traders increased bets the Federal Reserve will raise interest rates this year and as a jump in oil prices pushed up Treasury yields.

The U.S. currency strengthened against all except one of its 16 major counterparts as the probability the Fed will tighten this year climbed to 68 percent, the most since June. The greenback also rose as the second U.S. presidential debate Sunday added to speculation Democratic nominee Hillary Clinton will prevail over Republican Party candidate Donald Trump. New Zealand’s dollar dropped for a seventh day.

“The dollar has risen on the back an increase in pricing expectation of a December hike as the probability of a Clinton presidency has increased and more recently as oil prices have risen,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “The dollar got another leg higher following the move higher in U.S. Treasury yields at the Asia open.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.2 percent as of 11:41 a.m. in Tokyo after gaining 0.1 percent Monday. The dollar climbed 0.4 percent to 103.97 yen and appreciated 0.1 percent to $1.1126 per euro.

Oil Agreement

Saudi Arabia and Russia, the world’s two largest crude oil producers, said they’re ready to cooperate to limit output, helping send prices to a one-year high in London. Oil has surged about 15 percent in the past two weeks, and this will add to inflationary pressure in the first quarter of 2017, according to Macquarie Bank Ltd. Canada’s dollar was little changed at C$1.3186 to the U.S. currency after jumping 0.9 percent Monday. Crude is the nation’s second-largest export.

“Every central bank will be affected and will have to rewrite their forecasts and their guidance, but a stronger dollar will probably emerge from the ensuing volatility — except against the Canadian dollar — as U.S. Treasury yields keep rising,” Macquarie Bank analysts including Nizam Idris, head of foreign-exchange and fixed-income strategy, wrote in a note to clients. “A more-hawkish Fed should trump less-dovish central bankers elsewhere in terms of FX impact.”

New Zealand’s dollar fell 0.5 percent to 71.01 U.S. cents and the Aussie dropped 0.4 percent to 75.74 U.S. cents.

The U.S. economy probably isn’t at full employment and inflation remains below target, Federal Reserve Bank of Chicago President Charles Evans said as he argued for keeping interest rates low until core inflation moves higher.

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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Forex

IMTOs Drive 38.86% Rise in Foreign Exchange Inflows to $1.07bn in First Quarter of 2024

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Naira Exchange Rates - Investors King

Foreign exchange inflows into Nigeria surged by 38.86% to $1.07 billion in the first quarter of 2024, according to the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin.

This increase is attributed to the enhanced contributions from International Money Transfer Operators (IMTOs).

In January, IMTOs facilitated inflows amounting to $383.04 million. This figure dipped slightly to $322.83 million in February but rebounded to $363.70 million by March, this upward trend represents a 10.74% growth from the previous quarter of 2023.

The surge in forex inflows comes at a critical time for Nigeria, as the country continues to grapple with economic challenges, including inflation and a fluctuating naira.

The increased foreign exchange reserves are expected to provide much-needed stability to the naira and bolster Nigeria’s economic standing in the global arena.

CBN Governor Dr. Olayemi Cardoso has underscored the importance of remittances from the diaspora, which constitute approximately 6% of Nigeria’s GDP.

The recent approval of licenses for 14 new IMTOs is seen as a strategic move to enhance competition and lower transaction costs, thereby encouraging more remittances to flow through formal channels.

“We recognize the significant role that IMTOs play in our foreign exchange ecosystem,” Dr. Cardoso remarked during a recent press briefing.

“The inflows we’ve seen are a testament to the effectiveness of our strategy to engage with these operators and ensure that more remittances are channeled through official avenues.”

The CBN has also introduced measures to facilitate IMTOs’ access to naira liquidity at the official window, aiming to streamline the settlement of diaspora remittances.

This initiative is part of the broader effort to stabilize the forex market and address the persistent challenges of foreign currency availability.

The bulletin also revealed that the inflow from IMTOs has contributed significantly to Nigeria’s overall forex reserves, which are crucial for economic stability and growth.

Analysts suggest that the increased remittances will support the naira, providing relief amidst the country’s ongoing economic adjustments.

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CBN Resumes Forex Sales as Naira Hits N1,570/$ at Parallel Market

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US Dollar - Investorsking.com

The Central Bank of Nigeria (CBN) has resumed the sale of foreign exchange to eligible Bureau De Change (BDC) operators.

The decision was after Naira dipped to N1,570 per dollar in the parallel market,

CBN announced that it would sell dollars to BDCs at a rate of N1,450 per dollar. This decision aims to address distortions in the retail end of the forex market and support the demand for invisible transactions.

Following the CBN’s intervention, the dollar, which recently traded as low as 1,640 per dollar, has shown signs of stabilization.

The apex bank’s action is expected to inject liquidity and restore confidence among market participants.

BDC operators have welcomed the move. Mohammed Magaji, an operator in Abuja, noted that the dollar was selling at 1,630 per dollar.

He emphasized the market’s volatile nature but expressed optimism about the CBN’s intervention.

Aminu Gwadebe, President of the Association of Bureau de Change Operators of Nigeria, attributed the naira’s decline to acute shortages, speculative activities, and increased demand due to recent duty waivers.

He praised the CBN’s action as a necessary step to alleviate market pressures.

The CBN’s efforts include selling $20,000 to each eligible BDC, with a directive to limit profit margins to 1.5% above the purchase rate.

This strategy aims to ensure that end-users receive fair rates and to curb inflationary pressures.

The CBN’s ongoing reforms seek to achieve a market-determined exchange rate for the naira. As the naira continues to navigate turbulent waters, stakeholders remain hopeful that these measures will lead to a more stable and liquid forex market.

Market analysts suggest that sustained interventions and increased access to foreign exchange could help reverse the naira’s downward trend.

The CBN’s actions demonstrate a commitment to tackling the challenges facing the foreign exchange market and supporting Nigeria’s economic stability.

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Nigeria’s FX Inflows Leap 57% as CBN Steers Economic Confidence

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U.S dollar - Investors King

Nigeria’s foreign exchange (FX) inflows have surged by 57% over the past year, signaling newfound stability for the Naira.

Analysts attribute this growth to the Central Bank of Nigeria’s (CBN) consistent policies, which have bolstered investor confidence and enhanced market stability in Africa’s most populous nation.

Data from the CBN reveals that FX inflows rose to $8.86 billion in February 2024, compared to $5.66 billion in February 2023.

This increase is a testament to the effectiveness of the CBN’s strategic measures. Similarly, foreign exchange turnover skyrocketed 180% year-on-year to $240.64 million in February 2024.

“The upsurge in FX inflows reflects the positive impacts of increased interest rates and the relative stability of the exchange rate,” said Ayokunle Olubunmi, head of financial institutions ratings at Agusto Consulting.

He noted that high interest rates in Nigeria are attracting investors seeking better returns compared to developed countries.

The CBN has actively engaged with foreign investors, addressing concerns and providing insights into monetary policy actions.

Olayemi Cardoso, the CBN governor, emphasized that investor confidence has been restored, partly due to the bank’s clearance of a $7 billion foreign exchange backlog.

New investments into Nigeria also increased significantly, reaching $1.24 billion in February 2024, compared to $0.33 billion in January 2024. This uptick is indicative of a more stable and attractive investment climate.

Analysts point out that improved oil production and higher global oil prices have significantly boosted FX earnings.

Also, government policies aimed at attracting foreign investment, along with strategic management of the exchange rate, have played pivotal roles in this economic revival.

The CBN’s efforts to diversify the economy and boost non-oil exports are starting to yield results.

Increased diaspora remittances, facilitated by better official channels and incentives, have further contributed to the rise in FX inflows.

While challenges remain, the positive trend in FX inflows suggests a more robust and stable economy, encouraging further investment.

Consistent and transparent economic policies are expected to enhance investor trust, stabilizing the Naira and fostering a more favorable exchange rate environment.

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