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Forex

Dollar, Stocks Little Changed on Mixed Fed Signal

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  • Dollar, Stocks Little Changed on Mixed Fed Signal

The latest Federal Reserve policy statement did little to alter market views on the timing for further interest-rate hikes, leaving assets from the dollar to Treasuries and stocks little changed on the day.

The S&P 500 Index eked out a gain to halt a four-day slide, while a Apple Inc.’s best day since July boosted technology-heavy indexes. The Bloomberg Dollar Spot Index pared its advance after Fed officials gave little direction on when it might next raise rates. The yield on 10-year Treasury notes held just under 2.50 percent. The British pound added to gains after the House of Commons voted to allow the prime minister to start divorce talks with the European Union.

The Fed acknowledged rising confidence among consumers and business and reiterated their intention to lift rates gradually as the labor market tightens. The central bank left its options open before Friday’s jobs report delivers the latest reading on labor-market strength and as they grapple with the uncertainty created by a new presidential administration. Members differ over assumptions regarding the extent to which policies proposed by President Donald Trump might boost inflation.

U.K. Prime Minister Theresa May faces a battle with pro-European lawmakers in her Conservative Party after they grudgingly backed her plan to trigger Brexit negotiations by the end of March in its first test in Parliament.

Here are Wednesday’s major market moves:

Stocks

  • The S&P 500 rose less than one point to close at 2,279.42. That was good enough to halt a four-day slide that was the longest since the November election.
  • The Dow Jones Industrial Average advanced 24.86 points to end a three-day slump. The index is down 1.1 percent from a record set Jan. 26.
  • Apple Inc. surged 6.1 percent after earnings topped estimates. It was the biggest rally since July and left the stock at its highest level since July 2015.
  • The Stoxx Europe 600 Index climbed 0.9 percent to stop a losing streak.

Currencies

  • The Bloomberg Dollar Spot Index strengthened 0.1 percent, paring a gain that reached 0.4 percent after data from the ADP Research Institute showed private payrolls climbed by 246,000, compared with the 168,000 median projection of analysts surveyed by Bloomberg.
  • The euro fell 0.2 percent to $1.0778, while the yen traded for 113.06 per dollar.

Bonds

  • The yield on the 10-year U.S. Treasury note added four basis points to 2.49 percent. It fell four basis points on Tuesday.
  • The U.S. yield curve steepened Wednesday in the minutes after the Federal Reserve left its benchmark lending rate unchanged.
  • The difference between two-year yields and those on 30-year bonds widened to about 186 basis points, from about 182 basis points before the announcement, as shorter-maturity Treasuries pared losses.
  • Verizon Communications Inc. swapped less than a third of the $29 billion it originally sought to exchange in a transaction designed to refinance bonds maturing in the next five years.

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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Forex

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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