Forex

Aussie Dollar Gives Reserve Bank a Rate Hike It Doesn’t Want

Published

7 years ago

July 20, 2017

Aussie Dollar Gives Reserve Bank a Rate Hike It Doesn’t Want

Aussie firms fretting over talk of interest-rate hikes could be feeling like they’ve just had one — thanks to a spiraling currency.

The average value of the Australian dollar against a basket of other currencies, known as the trade-weighted index, has climbed 6.5 percent since the start of June. It takes just a 5 percent increase to inflict the same economic impact as a quarter-point hike in the Reserve Bank of Australia’s cash rate, according to Paul Bloxham, chief economist for Australia at HSBC Holdings Plc, who previously worked at the central bank.

The comparison suggests the Aussie’s ascent could start to hamper the nation’s economic transition. Since last year, the RBA has repeated a refrain that the currency’s slump since 2013 has helped industries outside mining; but that an appreciation “could” or “would” complicate an adjustment toward services and manufacturing. The two main levers for tightening and loosening conditions in the Australian economy are interest rates and the floating exchange rate.

“The RBA would certainly prefer a lower currency due to its positive impact on GDP and the economically beneficial realignment of investment and activity that it should deliver,” said Sean Keane, an Auckland-based analyst at Triple T Consulting. “What the higher currency will do, however, is take away some of the additional stimulus that the RBA and Australian Treasury may have been factoring in towards the end of this year and into next.”

Since the RBA first warned on the Aussie `complication’ last April, the currency has generally held in a range of 73 U.S. cents and 77 U.S. cents. With a spike in commodity prices last year, policy makers appeared fairly relaxed about the currency’s level — while they would have liked it lower, they could live with it. But with the Aussie now near 80 U.S. cents, it’s moving into new territory.

Ironically, the RBA gave the currency’s comeback a helping hand Tuesday by detailing a board discussion in the minutes of this month’s policy meeting. It estimated the level of the neutral cash rate — where output growth is at potential and inflation stable — at 3.5 percent, or two percentage points above the current record-low cash rate. Traders appeared to extrapolate that if policy makers are discussing that, then they must be discussing rate increases.

Some economists including Commonwealth Bank of Australia’s Gareth Aird said they didn’t interpret the minutes’ discussion as a signal of imminent hikes, with most expecting the RBA to stay on hold for the rest of this year. Markets predict a 60 percent chance of a hike in the first half of 2018.

The real test for rate increases is whether the RBA’s forecasts for the economy — growth accelerating to 3 percent and inflation meeting its 2 percent to 3 percent target — are likely to come to pass. Thursday’s jobs report, a speech from RBA Deputy Governor Guy Debelle on Friday and second-quarter inflation data next Wednesday are lining up as trigger points.

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Samed Olukoya

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

Dollar to Naira Black Market Today, April 19th, 2024

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

13 hours ago

April 19, 2024

Samed Olukoya

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,020 and sell it at N1,010 on Thursday, April 18th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined slightly when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

Buying Rate: N1,100
Selling Rate: N1,090

Naira

Naira’s Recent Gain Reflects Policy Direction, Says CBN Chief Olayemi Cardoso

Published

1 day ago

April 18, 2024

Samed Olukoya

Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has explained that the recent surge in the Naira is a testament to the positive direction of government policies rather than active intervention to defend the currency’s value.

Addressing attendees at the spring meetings of the International Monetary Fund and World Bank in Washington, Governor Cardoso underscored that the CBN’s intention is not to artificially prop up the Naira.

He clarified that the fluctuations observed in the country’s foreign exchange reserves were not aimed at defending the currency but rather aligning with broader economic goals.

Over the past month, the Naira has experienced a notable uptick in value against the dollar, signaling a reversal from previous declines. Data from Bloomberg reveals a 6.4% decrease in liquid reserves since March 18, coinciding with the Naira’s rebound.

Despite this decline, Cardoso pointed out that around $600 million had flowed into the reserves in the past two days, reflecting confidence in the Nigerian market.

Governor Cardoso articulated the CBN’s vision of a market-driven exchange rate system, emphasizing the importance of allowing market forces to determine exchange rates through willing buyers and sellers.

He expressed optimism about a future where the central bank’s intervention in the foreign exchange market would be minimal, except in extraordinary circumstances.

The recent resilience of the Naira follows a period of volatility earlier in the year, marked by a substantial devaluation in January. Since then, the CBN has implemented measures to stabilize the currency, including monetary tightening and initiatives to enhance dollar liquidity.

Cardoso highlighted the transformation in market sentiment, noting that investors now perceive Nigeria’s central bank as committed to stabilizing inflation and fostering economic stability.

As Nigeria continues its journey toward economic recovery and stability, Cardoso’s remarks provide insight into the central bank’s strategy and its impact on the country’s currency dynamics.

Naira

Dollar to Naira Black Market Today, April 18th, 2024

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

2 days ago

April 18, 2024

Samed Olukoya

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,050 and sell it at N1,040 on Wednesday, April 17th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.