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Forex

Focus Turns to Fed as Dollar Gains, Bonds Drop

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US dollar - Investors King
  • Focus Turns to Fed as Dollar Gains, Bonds Drop

Investors moved on from President Donald Trump’s address to Congress, shifting their focus to the timing of a U.S. rate increase as the dollar strengthened, stocks advanced and bonds fell. Robust factory data from China spurred gains in metal prices.

The Bloomberg Dollar Spot Index climbed the most in three weeks, the yield on 10-year Treasuries rose and European banking stocks gained after odds jumped for a Federal Reserve rate increase this month. Shares of commodity producers found support from a report indicating improving health for Chinese manufacturing which also helped prices for raw material exports.

“Fed speakers trump Trump,” Richard McGuire, the head of rates strategy at Rabobank International in London, wrote in a note. Trump’s speech lacked “fresh content for the market to trade off, with big tax cuts, deregulation and an infrastructure plan being mentioned but not supported by any details. Given this, all focus instead turned to the slew of hawkish rhetoric from Fed speakers.”

The odds of an increase in March for U.S. interest rates rose to more than 60 percent, pushing up the dollar and dragging Treasuries lower. Federal Reserve Bank of New York President William Dudley said the case for tightening has become a lot more compelling. Fed Bank of San Francisco President John Williams said he expects a rate increase to receive “serious consideration” at this month’s meeting.

Trump in his speech urged Americans to abandon conflict and help him remake the fabric of the country, a moment he hopes will turn the page on his administration’s chaotic beginning and bring clarity to his policy agenda. He offered few new proposals and made no suggestions on how he would pay for his plans, including a replacement of Obamacare, a tax overhaul including cuts for the middle class, $1 trillion in infrastructure investment and a large increase in defense spending.

Here are the main moves in markets:

Currencies

  • The Bloomberg Dollar Spot Index jumped 0.4 percent as of 9:53 a.m. in London, climbing for a fourth straight day and heading for the biggest advance since Feb. 7. The yen slumped 0.7 percent to 113.52 per dollar, for a third day of losses.
  • The euro fell 0.3 percent to $1.0545 and the British pound was little changed at $1.2383 after slipping 0.5 percent Tuesday.

Stocks

  • European stocks climbed the most since Feb. 1, adding 1 percent as all industry sectors advanced. A gauge of banks gained 2 percent, leading the advance, while basic resources shares rose 1.9 percent.
  • Futures on the S&P 500 Index added 0.4 percent. The benchmark index finished February with its best monthly gain since March, climbing 3.7 percent.
  • Japan’s Topix index increased 1.2 percent, propelled by a weaker yen towards the the biggest rally in more than two weeks.
  • The Shanghai Composite Index added 0.2 percent after data on the producer price rebound, giving top officials gathering in Beijing a solid economic backdrop as they seek to rein in financial risks.

Bonds

  • Yields on 10-year Treasuries rose three basis points to 2.42 percent, climbing for a third straight day.
  • Yields on benchmark German bonds climbed four basis points to 0.25 percent after a report showed unemployment continued to decline. Yields on French benchmarks and gilts both rose three basis points.

Commodities

  • Gold dropped for a third day, falling 0.3 percent to $1,244.66 an ounce after completing a 3.1 percent gain in February.
  • West Texas Intermediate Crude rose 0.5 percent to $54.26. Oil ended last month 2.3 percent higher.
  • Copper added 1.7 percent, advancing for a fourth straight session.

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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