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Bitcoin Extends Loss After China’s Central Bank Warns Investors

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Bitcoin
  • Bitcoin Extends Loss After China’s Central Bank Warns Investors

Bitcoin extended Friday’s tumble amid concern China will tighten rules on the digital currency to curb capital outflows.

The cryptocurrency slid 1.2 percent to $887.34 at 12:28 p.m. in Hong Kong, after falling as much as 10 percent on Friday. The People’s Bank of China’s Shanghai branch said in a statement late Friday that its officials, along with the city’s financial office, asked bitcoin trading platform BTCChina.com to conduct self-checks and rectify any problems. The State Administration of Foreign Exchange has scrutinized some major bitcoin exchanges, possibly to investigate the use of the digital asset to evade capital controls, QQ.com reported.

Bitcoin rallied since early 2015 as Chinese buyers turned to alternative assets to hedge against the weakening yuan and take cash out of the nation. By buying bitcoin onshore and selling it offshore for another currency, investors can evade the tightening scrutiny on fund outflows. Other than a ban on financial institutions’ involvement, Chinese regulators had largely taken a hands-off approach on the cryptocurrency.

“Bitcoin is one of the rocks they haven’t turned yet in terms of controlling the flows,” said Zennon Kapron, managing director of Shanghai-based consulting firm Kapronasia. “It’s inevitable that there’s going to be something but the question is what the regulations will be when it happens.”

This is not the first time China’s government has sent bitcoin tumbling. In 2013, it banned financial institutions from handling bitcoin transactions, sparking a slide in price. The PBOC reiterated that stance in Friday’s statement, saying that bitcoin is a virtual commodity without the legal status of a currency. It characterized recent bitcoin moves as “unusual.”

Bitcoin has become increasingly volatile since rallying to a record-high $1,162 on Thursday, slumping 11 percent that day after the yuan jumped. In December it surged 28 percent.

Policy makers are likely to require more reporting from bitcoin exchanges and incorporate their flows into the monitoring of the $50,000 quota Chinese citizens are given to convert yuan to foreign exchange — though it will be more challenging to do so with the decentralized cryptocurrency, said Kapron.

BTCC — which runs BTCChina.com, one of the most active Chinese exchanges — said in a statement on its website that it works closely with the PBOC to ensure that it’s operating in accordance with Chinese laws. Huobi, another major Chinese platform, will also conduct strict self-checks as required by regulators and it plans to work with other bitcoin firms to establish industry standards, chief operating officer Zhu Jiawei said in a message.

“The policy risks of bitcoin trading in China are higher” as the nation has capital controls, said Dong Dengxin, director of Finance and Securities Research Institution at Wuhan University of Science and Technology. “If bitcoin trading disturbs China’s financial order, there’s a possibility it will be deemed illegal or banned.”

Bitcoin surged 120 percent in 2016 as the yuan dropped the most since 1994 and Chinese bonds and equities declined, though its value of around $15 billion still pales in comparison with most mainstream asset classes in the nation.

The digital asset traded at 6,128 yuan ($883.9) on Chinese firm OKCoin Co.’s platform, a small discount to the dollar price based on spot rates. As recently as Friday morning, bitcoin’s yuan price had traded at a premium to its dollar price.

“Until there’s more clarity over what the PBOC is planning or what exactly they mean, I think it will be difficult for bitcoin price to retrace the rally,” said Kapron.

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

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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US Dollar

Dollar Falls as Risk Appetite Improves, Sterling Dips on BoE

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US Dollar - Investorsking.com

The dollar dropped to its lowest point in three days on Thursday as global market risk appetite improved, while sterling zig-zagged after the Bank of England slowed the pace of its bond-buying, but left interest rates unchanged.

Fewer Americans filed new claims for unemployment benefits last week, data showed, as COVID-19 vaccination efforts and massive amounts of government stimulus led to a further reopening of the economy.

While the U.S. economy has been gaining steam, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

Those statements reinforced “the lower-for-longer mentality with regards to interest rates,” making the greenback less appealing, said Neil Jones, head of FX sales at Mizuho.

The safehaven U.S. dollar was last down 0.31% at 91.977 against a basket of peer currencies.

“What we’ve seen early in New York is a little bit of back-and-forth gyrations, just because of the Bank of England meeting,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

“They kept their QE target in place but they said they are going to reduce the weekly pace of purchases, but that’s not a signal and so sterling has kind of gone up and down and done nothing at the end of the day,” Bregar said.

The pound was last down 0.08% against the weaker dollar at $1.3900 .

The euro was up 0.47% versus the dollar at $1.2061 , and up 0.65% against the pound, at 86.88 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

The Aussie was up 0.1% versus the U.S. dollar at 0.77515 at 1028 GMT, having hit as low of 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1% on the day.

“The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event,” wrote ING strategists in a note to clients.

The Canadian dollar hit a three-and-a-half year high, helped by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

In cryptocurrencies, ether traded around $3,500 after reaching a record high of $3,559.97 on Tuesday, skyrocketing nearly 800% this month.

Bitcoin declined 0.2% to $57,392.75.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

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