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China Weakens Yuan for Sixth Straight Day

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Yuan
  • China Weakens Yuan for Sixth Straight Day

China’s central bank guided the yuan lower Wednesday for the sixth trading session in a row, its longest losing streak since January.

The People’s Bank of China set the daily midpoint for the dollar-yuan pair at 6.7258, marking a 0.24% decline in the yuan from Tuesday’s midpoint. The PBOC maintains close control of the currency’s value onshore and allows the yuan to swing just 2% around the level it sets each day.

Wednesday’s fixing put the yuan at its lowest level against the dollar since September 2010. The PBOC set the yuan weaker for six straight trading sessions during a period that spans the Golden Week holiday in China. It marks the longest stretch of weaker yuan fixes since the eight sessions ended Jan. 7.

The yuan has fallen 0.7% so far this month, on track for the biggest monthly decline since June, according to Thomson Reuters data. Since Chinese markets were closed for the first week of October, that move has happened entirely in the past three days.

The latest bout of yuan weakness comes after the International Monetary Fund added the currency to its elite group of reserve currencies on Oct. 1. Traders and investors said the PBOC had an incentive to keep the yuan’s value fairly stable last month, ahead of the yuan’s inclusion in the IMF basket and as China hosted leaders of the world’s largest economies at the Group of 20 Summit in early September. The yuan rose 0.1% against the dollar in September.

To be sure, the dollar has advanced broadly in recent days as comments from U.S. Federal Reserve officials and economic data have boosted investors’ expectations for a U.S. rate increase this year. Higher interest rates tend to lift the value of a currency, as they attract investors seeking yield.

The Dollar Index, which measures the dollar against 16 other currencies, has gained 2% so far in October.

“The weak [yuan] fixing in the past few days is mostly driven by the strong dollar,” said Ying Gu, Asia rates and foreign-exchange strategist at J.P. Morgan.

Still, many strategists continue to expect the yuan to fall more this year because of domestic factors. China’s economy is slowing and capital continues to leave the country, both of which should put pressure on the yuan.

Jason Daw, head of emerging markets FX strategy at Société Générale, this week reiterated his call for investors to short the offshore yuan against the U.S. dollar, euro, Japanese yen and Australian dollar. Shorting a currency is a bet that it will fall. In such a trade, an investor typically borrows the yuan overnight in Hong Kong and swaps it for dollars, hoping to exchange the money back the next day after the yuan has declined.

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.

Naira

Naira Closed at N411.25 to US Dollar at NAFEX Window

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Naira Dollar Exchange Rate - Investors King

The Nigerian Naira declined further against the U.S Dollar on Tuesday ahead of the Ramadan holiday to trade at N411.25 to a single U.S Dollar at the Nigerian Autonomous Foreign Exchange (NAFEX) window.

The local currency plunged as low as N420.23 per dollar during the trading hours of Tuesday despite opening the day at N410.33/US$ before settling at N411.25 to a US dollar.

Investors on the window exchanged $98.33 million on Tuesday.

At the parallel section of the foreign exchange, Naira traded at N483 to a United States Dollar; N673 to a British Pound and N580 to a Euro.

Foreign exchange rates remained largely unchanged at the bureau de change section, with the Naira trading at N482 to a U.S Dollar; N674 to a British Pound and N584 to a Euro.

Several factors continue to weigh on the Nigerian Naira, especially with the foreign reserves hovering around record low and crude oil output not at an optimal level.

Other factors like rising inflation rate and drop in economic activity due to COVID-19 effect on the economy and lack of enough fiscal buffer to cushion the economy.

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Naira

Daily Naira Exchange Rates; Thursday, May 6, 2021

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Naira Exchange Rates - Investors King

Naira depreciated further at the parallel market on Thursday as the local currency traded at N485 to a United States Dollar. The Nigerian Naira exchanged at N676 to a British Pound and N585 to a Euro as shown below.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
06/05/2021 480/485 665/676 575/585 62/69 395/405 292/320

Bureau De Change Naira Rates

Date

USD

GBP

EURO

NGN

BUY/SELL

BUY/SELL

BUY/SELL

06/05/2021

475/482

663/676

575/587

06/05/2021

475/482

663/676

575/587

Central Bank of Nigeria’s Official Naira Rates

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Forex

CBN Extends N5/$ Incentive Period to Boost Dollar Inflow

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has extended the N5 per US Dollar incentive on forex remittance indefinitely to boost liquidity and further deepen economic recovery.

The initiative was scheduled to end on May 8. It was introduced to encourage recipients of dollars to use formal banking channels and help the central bank capture such inflows to boost the stability of the local currency, which has been under pressure after oil prices plunged last year.

“We hereby announce the continuation of the scheme until further notice,” the regulator said in a statement on its website on Thursday.

The naira has been devalued three times since last year after a sharp drop in oil earnings, which accounts for 90% of foreign-exchange inflows, and remittances from workers abroad led to a dollar crunch in the West African nation, which produces the most crude in Africa. The local unit traded for 410.31 on the investors and exporters window, also called Nafex, as of 8:51 a.m. in Lagos.

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