- Dollar Weakens on U.S. Politics; Equities Falter
Stocks pared recent gains and the dollar sat at an 11-month low as investors assess an investigation into the U.S. president that may stall his economic agenda. The Australian dollar plunged the most since May after a dovish speech by the central bank deputy governor.
European equity markets opened lower, echoing moves in Asia, while U.S. index futures were steady. The New Zealand dollar led G-10 currency gains against the greenback, hitting its highest since September after the country’s finance minister said the kiwi’s level reflected a strong economy. The euro continued to gain and was at its highest intraday level since Aug. 24. U.S. Treasuries and Australian bonds advanced.
Global equities have continued hitting fresh highs this week amid corporate results that have reinforced faith in earnings and the economy. While it’s early in the U.S. reporting season, some 83 percent of companies have topped estimates on the bottom line. Asian shares are up more than four percent in the past two weeks, with markets in Japan and Hong Kong near two-year highs.
Politics in Washington are again at the forefront after central banks dominated proceedings earlier in the week, with reports that U.S. special counsel Robert Mueller is expanding his investigation of Donald Trump. The news came less than a day after the president told the New York Times that any digging into his finances would cross a red line.
Here are the main moves in markets:
- The MSCI Asia Pacific Index was down 0.2 percent as of 3:15 p.m. Hong Kong time, its first decline in 10 days. Japan’s Topix Index fell 0.2 percent Friday, though it’s still near its highest since August 2015. Australia’s S&P/ASX 200 Index slid 0.7 percent.
- The Euro Stoxx 50 dropped 0.2 percent after closing little changed Thursday. The FTSE 100 rose 0.1 percent, extending gains to a third day.
- The Hang Seng Index fell 0.1 percent, the Shanghai Composite Index lost 0.2 percent. Futures on the S&P 500 Index were unchanged after the underlying gauge closed flat Thursday.
- The Aussie tumbled 0.7 percent to 79.00 U.S. cents, after RBA Deputy Governor Guy Debelle said board discussions on the level of the neutral interest rate shouldn’t be interpreted as a signal for tighter policy. Governor Philip Lowe is due to speak next week. The kiwi rose 0.4 percent to 74.24 U.S. cents following comments by Steven Joyce.
- The Bloomberg Dollar index was down 0.2 percent, in line for a weekly loss of 0.8 percent. The yen was up 0.1 percent at 111.75 per dollar.
- The euro jumped 0.3 percent to $1.1667 at a 23-month high, building on its 1 percent surge Thursday.
- WTI crude was steady at $46.90 a barrel after losing 0.9 percent Thursday.
- Gold was up 0.3 percent at $1,247.84 an ounce, rising for a second week.
- The yield on U.S. 10-year Treasuries fell one basis point to 2.25 percent.
- The yield on Australian government notes with a similar maturity was down four basis points at 2.70 percent, and the three-year yield fell seven basis points to 2.02 percent.
Naira Maintains Stability at Official Fx Window
The Naira maintained its streak on Monday, settling to close at N415.07 per dollar. This is the same price at which the Nigerian currency has closed for the last few days, according to the Investors and Exporters window where the Naira is traded officially.
While there have been very marginal differences in the opening prices over the last days, in the end the currency has come around to settle down at the same price (N415.07 per dollar) at the close of each day.
On Friday, the Naira opened at N413.71 per dollar which represented a 0.03% change from the previous day, according to the Investors and Exporters window. On Monday, the currency opened at a similar price, starting the day off at N413.75 per dollar.
Although there have been minimal changes in the opening prices, generally the currency opens at similar prices, with backgrounds of N413 per dollar and changes of only a few kobo.
While the general opening and closing prices didn’t witness much change, the same cannot be said for the Spot and Forward rates. On Friday, the Spot rate was between N404 per dollar and N444 per dollar. However, Monday saw a significant change in the Spot rate. Across all transactions that occurred on Monday, the naira reached a high of only N405 per dollar (N1 lower than Friday’s high), and went on to reach a low of N456.97 per dollar (N12 lower than the previous day).
The Forward rate – for future transactions that were agreed upon on Monday – saw a more significant change. Friday’s Forward rate high was recorded at N411 per dollar, but on Monday that fell greatly to N452 per dollar. However, Monday’s Forward rate lowest was N453 per dollar, about N2 better than the N455 per dollar at which it traded on Friday.
The total turnover of the dollar recorded on Monday sat at $256.69 million. This was considerably higher than the turnover of $215 million that was recorded on Friday.
At the parallel market on Monday, the Naira fell to close at N569 per dollar from the N560 per dollar at which it traded the previous day. After that exponential rise to about N535 per dollar, the parallel market is seeing the Naira return even closer to the N575 per dollar price at which it had sat for a while.
Naira Stays Flat at Official Market
After closing at N415.07 per dollar on Thursday, the Naira maintained a flat rate and went on to close at the exact same price on Friday. This is according to the data released by the FMDQ group, on the group’s official website.
This connotes a certain stability around the currency, as the recent rates at which the currency has been closing at in recent days and weeks have hovered around this particular price range. It further strengthens the idea that the festive period will see the Nigerian currency trade at that range.
The FMDQ group as usual also updated the Forward rate and the Spot trade of the Naira’s trades on Friday. The prices appeared to have returned to some of the usual, standard rates which they consistently traded for a while.
The Spot rate returned to its usual price range, falling as low as N444 per dollar and rising up to N404 per dollar. What this means is that throughout the entire day, the Naira traded at different prices at different times, trading between N404 per dollar and N444 per dollar.
For the Forward rate, a high of N411 per dollar was reached while a low of N455.97 per dollar was gotten. The Forward rate, which is used for future transactions generally trades at lower prices than the Spot rate.
On Friday, the total turnover of the dollar sat at $215.47 million. Turnover refers to the amount of the currency that is involved in the trade throughout the entire day. Everything that was traded on Friday amounts to 215 million dollars. This was a huge increase from the turnover of the previous day, which sat at $98 million.
It has been reported that in a bid to save the naira, the Central Bank of Nigeria threw a little over $2 billion into the Investors & Exporters window in the seven months to July this year (2021). In the corresponding period last year, the apex bank only injected $628 million into the window.
Haven Currencies Gained Across the Board as Investors Assesses New COVID Variant
Investors are moving their funds to known safe-haven currencies to curb risk exposure while they evaluate the effect of the new covid variant on global financial markets.
Two cases of the new Covid variant called B.1.1.529 that emanated from South Africa were reported in Hong Kong on Friday, increasing concerns it could hurt global economic recovery and compel nations to start closing their borders going into the new year.
Leading safe-haven currency, the Japanese Yen gained against the United States Dollar to 113.151 at 8:40 pm Nigerian time, down from 115.450 it attained on Thursday as shown below.
Similarly, the Swiss Franc outperformed other currencies as its attractiveness surged among global investors looking to avert catastrophe amid rising global uncertainties.
Swiss Franc rose against the United States Dollar to 0.92187 from 0.93604 it peaked on Thursday before news that the United Kingdom and other nations were considering shutting their borders.
The Euro rebounded against the United States Dollar after plunging from 1.18905 it traded in August to 1.12039 before paring losses to 1.13129 when the news of new covid variant became a concern.
Surprisingly, gold, a known haven asset, failed to sustain its earlier gain and pulled back from $1815.46 to $1788.10 at the time of writing. Another indication of rising global uncertainty.
Even experts like Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, had earlier predicted that gold will shine given its characteristics as a haven asset.
He said “Times like this are when gold shines and we’re seeing investors flock back to an old reliable friend today. It has pulled a little off its highs after hitting $1,815 earlier in the session but it remains above $1,800 at the time of writing. It’s an interesting one for gold and bonds, as the situation now is very different from last year.”
Investors however seems to be dumping the tradition risk aversion commodity for something more stable, especially with bitcoin and other cryptocurrencies now doing better number in terms of gain in a period like this.
Crude oil has dropped more than 5 percent or $10 today as energy traders aggressively closed the positions to better assess the situation.
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