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Yen Extends Gains as Stock Rally Fades After Fed

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  • Yen Extends Gains as Stock Rally Fades After Fed

The yen extended gains and a stock rally fizzled as traders in Asia digested minutes from the Federal Reserve’s December meeting. Crude oil maintained an advance.

Japan’s currency rose 0.5 percent against the dollar and the Bloomberg Dollar Index retreated for a second day. Equity indexes in Japan swung between gains and losses, while Australian shares advanced and South Korea’s Kospi index dropped. The S&P 500 Index rose a second day overnight and the greenback fell as the Fed minutes highlighted concerns about the impact of a strong currency on the new U.S. administration’s stimulatory economic policies.

Uncertainty over the path of U.S. fiscal policy weighed heavily on the Fed’s discussion of the economy and the path of monetary policy when it decided to lift rates last month, minutes from that meeting showed. Despite growing attention to the risks of fiscal policy spurring faster growth than currently forecast, most on the committee reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate. Stocks have rallied with the dollar, while Treasuries have plunged since Trump’s election.

“Stop-loss orders were probably taken out after dollar-yen broke 117,” said Shigeki Yoshitoshi, head of Japan foreign-exchange and commodities sales at Australia & New Zealand Bank Group Ltd. in Tokyo. “Along with the caution about a strong dollar in the FOMC minutes, the tone wasn’t as hawkish as I expected.”

Stocks

  • The MSCI Asia Pacific Index rose 0.6 percent as of 10 a.m. in Tokyo. The Topix index added 0.1 percent and Australia’s S&P/ASX 200 Index advanced 0.3 percent. South Korea’s Kospi index slid 0.1 percent and New Zealand’s S&P/NZX 50 Index lost 0.2 percent.
  • Futures on the S&P 500 fell 0.1 percent after the underlying gauge rose 0.6 percent in New York. The Dow Jones Industrial Average resumed its pursuit of 20,000, rising to 19,942.16.
  • The Stoxx Europe 600 Index fell 0.1 percent to halt a three-day advance that took the measure into a bull market.

Currencies

  • The Bloomberg Dollar Index extended losses, declining 0.3 percent, after touching its highest level since its 2004 inception on Wednesday. The measure has jumped 1.7 percent since Dec. 13.
  • The yen rose 0.5 percent to 116.66 per dollar after rising 0.4 percent the previous session. South Korea’s won jumped 1.2 percent, the most since September.
  • The euro climbed 0.4 percent to $1.0533 after jumping 0.8 percent in its first gain against the dollar this year, after the region’s inflation accelerated in December to the fastest pace since 2013.

Commodities

  • Crude oil futures were little changed after Wednesday’s 1.8 percent advance. U.S. crude inventories were projected to have declined while OPEC and other producers implement promised production cuts.
  • Gold rose 0.7 percent in early trading.

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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Naira

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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Naira

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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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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