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Yen Gains as Election Jitters Weigh on Stocks, Hit Mexican Peso

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  • Yen Gains as Election Jitters Weigh on Stocks, Hit Mexican Peso

Investors are becoming more jittery amid a tightening race for the U.S. presidency, spurring demand for haven assets including the yen while weighing on stocks and Mexico’s peso. Egypt’s currency tumbled as the country switched to a freely floating exchange rate.

The yen climbed to a one-month high, U.S. equity index futures fell and the MSCI All Country World Index held near its lowest since July after Fox News reported that a Federal Bureau of Investigation probe involving Democratic nominee Hillary Clinton was intensifying. The peso weakened versus all major peers on concern Mexican exports will suffer if she loses, while Bloomberg’s dollar index dropped for a fifth day amid speculation the election’s fallout could deter the Federal Reserve from raising interest rates. Gold gained.

Investors turned more risk averse over the past week as voter surveys suggested Clinton’s once dominant lead over Donald Trump was faltering ahead of the Nov. 8 election. Poll aggregator FiveThirtyEight gives her a 68 percent chance of victory, 14 percentage points less than it estimated prior to a Friday announcement that the FBI had reopened a probe into her use of an unauthorized e-mail server while Secretary of State. Bets on a December interest-rate hike by the Fed were stepped up on Wednesday at the central bank left policy unchanged and signaled a December move was likely.

“U.S. political uncertainty ahead of next week’s election is weighing on markets,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney. “Most polls suggest the presidential election is turning out to be a closer call now compared to a few days ago following the controversy about Hillary Clinton’s e-mail investigation. In the short term, this should weigh on the dollar particularly versus the yen and euro.”

The FBI’s investigation into Clinton has taken on a very high priority, Fox News reported, citing unidentified sources. She led Trump 39 percent to 35 percent among independents surveyed Friday through Monday, the latest Purple Slice online poll for Bloomberg Politics showed.

Currencies

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.2 percent as of 8:26 a.m. London time. The yen strengthened as much as 0.7 percent to a one-month high and South Korea’s won rebounded 0.7 percent from near to a three-month low. A JPMorgan Chase & Co. index of global currency volatility held at a seven-week high.

“The market’s concerned that the FBI investigation will swing next week’s election,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc.

The Fed left rates on hold for a seventh consecutive meeting Wednesday and said in its statement it only needed “some” further evidence that inflation and employment were on track toward their goals before raising them. Futures contracts show a 78 percent likelihood of an increase in December, compared with 68 percent on Tuesday.

Mexico’s peso fell as much as 0.9 percent to its weakest level since September, reversing an earlier advance. The currency tends to fall when Trump’s prospects election prospects improve because he has pledged to revisit the North American Free Trade Agreement that governs commerce between the U.S. and Mexico.

The British pound added 0.3 percent before the Bank of England announces the outcome of a monetary policy review and updates its inflation projections. A 17 percent tumble in the pound since the U.K.’s June vote to leave the European Union has stoked expectations that consumer-price gains will accelerate.

The Egyptian pound weakened 33 percent as the central bank said it would switch to a freely floating exchange rate. The monetary authority also raised key lending rates by 300 basis points.

Stocks

Futures on the S&P 500 Index fell 0.1 percent following a seventh day of losses in the U.S. benchmark, its longest selloff since November 2011.

Nasdaq 100 Index contracts declined 0.3 percent after Facebook Inc. slid in extended New York trading after reporting earnings. The social network predicted an uptick in costs and a slowdown in advertising sales growth.

The Stoxx Europe 600 Index fluctuated following an eight-day losing streak. Credit Suisse Group AG fell 3.9 percent after reporting earnings, while ING Groep NV gained 3.6 percent and Societe Generale SA surged 4.8 percent.

Asia ex-Japan stocks held near their lowest level since September after sliding 1.4 percent in the last session. New Zealand’s benchmark stock gauge entered a correction, while Japanese markets were shut for a holiday. Hong Kong’s Hang Seng Index slipped to its lowest level since August and Wynn Macau Ltd. dropped by the most since August after reporting a profit that trailed analysts’ estimates.

“The move to take risk off the table continues,” Chris Weston, chief market strategist in Melbourne at IG Ltd., said in an e-mail to clients. “We have reached a point where there is a buyers strike, where money managers have reduced their risk, increased cash allocations within the portfolio and are happy to ride out this mini-storm of uncertainty.”

Commodities

Gold climbed for a sixth day, approaching $1,300 an ounce in its longest winning streak since September.

“Gold was stronger on the back of safe-haven buying as opinion polls on the U.S. election continued to show Trump gaining,” Australia & New Zealand Banking Group Ltd. said in a note. “Weak equity markets also helped improve investor appetite.”

Crude oil advanced 0.4 percent to $45.50 a barrel. It tumbled 2.9 percent in the last session as data showed U.S. inventories rose by 14.4 million barrels last week, the biggest gain in data going back to 1982 and more than the 2 million barrel increase forecast in a Bloomberg survey. Record OPEC output last month is also damping the outlook for oil, complicating the group’s effort to stabilize prices.

Bonds

The yield on U.S. Treasuries due in a decade was little changed at a one-week low of 1.80 percent.

Australia’s 10-year yield fell four basis points to 2.30 percent. Similar-maturity notes fell in Italy, Portugal and Spain.

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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Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

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Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

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Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

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The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

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CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

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Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

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