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Asian Stocks Extend Global Rally; Yen, Gold Weaken

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Emerging Markets
  • Asian Stocks Extend Global Rally; Yen, Gold Weaken

Asian equities extended a global rally as Chinese shares climbed after a selloff and North Korean artillery drills did little to ruffle markets. The yen weakened with gold.

Stocks in Japan and Hong Kong led gains after the MSCI All-Country World Index closed at a record and European shares surged to a 20-month high in the wake of French elections. Volatility continued to melt away as Shanghai stocks climbed from a three-month low on speculation concerns of a regulatory crackdown were overdone. The dollar rose against most major peers, while Treasuries maintained losses. Australia and New Zealand are closed Tuesday for Anzac Day.

Markets jumped Monday as Emmanuel Macron advanced as the favorite in the presidential runoff, easing concerns that France will leave the euro currency bloc. With worries over China and North Korea also in check for the moment, traders are turning their attention to a raft of other potential market-moving events, including corporate earnings and U.S. President Donald Trump’s agenda for the world’s largest economy.

“The uplift in risk appetite had been the result of a single event, but this week carries with itself a multitude of factors to look out for,” said Jingyi Pan, a market strategist in Singapore at IG Asia Pte Ltd. “The second half of the week certainly brings President Donald Trump back to the stage as he presents both opportunities, in the form of his tax package, and risk, should his push for the border wall drive the U.S. government to a shutdown.”

Trump will call for cutting taxes for individuals and lowering the corporate rate to 15 percent when he unveils his plan Wednesday, according to a White House official. At the same time, the administration appeared ready to go to the mat for its planned Mexican border wall in this week’s must-pass spending bill, setting up a clash with Democrats that may make a government shutdown at week’s end more likely.

While investors shrugged off North Korea’s largest-ever live-firing drill to mark the 85th anniversary of the Korean People’s Army, the situation remains tense. Trump warned of imminent action to contain North Korea’s nuclear threats, while Chinese President Xi Jinping called for restraint in a phone call with the U.S. president.

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.

Forex

Nigeria’s Annual Remittance Inflow Estimated at $24 Billion -CBN

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The Central Bank of Nigeria (CBN) has started focusing on how to better harness Nigeria’s huge diaspora remittances as seen in recent foreign exchange policy geared towards stimulating growth and fast-tracking economic recovery with foreign inflows.

On Thursday, the apex bank said it adjusted forex policy to service the economy with diaspora remittances and curb the excesses of few unscrupulous forex dealers.

In an effort to boost remittance inflows and foster an environment that would enable faster, cheaper, and more convenient flow of remittances back to Nigeria, the Central Bank of Nigeria, on November 30, 2020, announced a new policy initiative, which would help to support these objectives,” Godwin Emefiele stated.

Speaking further, he said, “Given the estimated annual remittance inflow of close to $24bn, which could help in improving our balance of payment position, reduce our dependence on external borrowing and mitigate the impact of COVID-19 on foreign exchange inflows into the country, the CBN sought to find ways to support improved remittance inflows into the country through official channels.

Based on this premise, we analyzed data on IMTO inflows into the country over the past year, and through our investigations discovered that some IMTOs, rather than compete on improving transaction volumes and create more efficient ways for Nigerians in the Diaspora to remit funds, resorted to engaging in arbitrage arrangements on the naira dollar exchange rate, which to a large extent resulted in a significant drop in flows into the country. It also encouraged the use of unsafe unofficial channels, which also supported diversion of remittance flows meant for Nigeria, thereby undermining our Foreign Exchange management framework.

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CBN Forced Speculators, Hoarders to Sell Dollar Lower

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The Central Bank of Nigeria’s new forex policy has forced many speculators and hoarders at the Nigerian parallel market popularly known as the black market to start bringing out their forex at an even lower price.

The Naira to United States Dollar exchange rate moderated from N500 to N470 earlier this morning across the nation’s black market.

Similarly, the local currency exchanged at N620 to a British Pound, an improvement from N640 it was sold on December 1, 2020.

The story is not different against the European common currency as it gained slightly to N570, up from N580 it sold on Tuesday.

The improvements recorded against global counterparts was after the CBN directed that henceforth recipients of foreign remittance can now receive such fund in foreign currency (US Dollar) in cash or through an ordinary domiciliary account.

This means the apex bank planned to inject $20 billion estimated diaspora remittances per year into the real sector of the economy to force hoarders to sell their dollars or lose substantially and also to curb forex dealers in the habit of buying forex directly from the recipient’s domiciliary account because of old CBN policy that restricted them from withdrawing foreign currency in cash.

With this old policy out of the way, recipients of foreign remittances can now withdraw foreign currency and exchange it at any of the registered bureau de change operators across the nation at N392 to a US dollar. The bureau de change rate set by the central bank.

Investors King expects the policy to fast track the recovery process and enhance economic activity across the board, especially at a time when importers are looking for forex to bring in goods in order to meet the usual December high demand.

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Naira Exchange Rate Improves as CBN Plans to Flood Economy With $20 Billion Diaspora Remittances

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The Naira to US Dollar exchange rate improved by N10 to N490 on Tuesday following the Central Bank of Nigeria’s new directive that allows recipients of diaspora remittances to receive their fund in foreign currency (US Dollar) or via their ordinary domiciliary account.

The move was after the apex bank blamed the parallel market for the wide foreign exchange rate and cautioned analysts for using speculative rates as the real Naira/US dollar rate.

Therefore, the apex bank decided to inject $20 billion annual diaspora remittances into the real sector of the economy and hurt the activities of unscrupulous individuals at the parallel market.

Investors King expects this to gradually moderate the nation’s foreign exchange rate against global counterparts, deepen business activities and fast track economic recovery.

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