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Investors Jump Back Into the Euro as Going Short Proves ‘Lethal’

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Euro currency
  • Investors Jump Back Into the Euro as Going Short Proves ‘Lethal’

Hedge funds. Asset managers. Central banks. These are just some of the players in the $5.1 trillion-a-day currency market who are buying the euro after shunning it over the past three years.

The shared currency has snapped its losing streak to become the best performer among Group-of-10 peers in 2017. After plunging to a 14-year low in January, the currency has staged a stunning comeback, rising to $1.1910 on Aug. 2, a level not seen since January 2015.

“To be short euros here is absolutely lethal,” said Ulf Lindahl, chief executive officer of A.G. Bisset Associates, who manages about $1 billion from Norwalk, Connecticut. He expects the currency to rise to $1.30 by the end of the year, if not sooner. Even after its 3.6 percent rally in July, investors and analysts are predicting further gains. So who’s buying euros, and why?

Hedge Funds

Hedge funds initially missed out on the euro rally by holding net-bearish bets until May before jumping in, according to data from the U.S. Commodity Futures Trading Commission. Since then, speculators have piled headlong into bullish bets, building up the biggest net-long position in six years.

Fast-money traders who use momentum and trend-following strategies were well positioned for the rally, said James Kwok, London-based head of currency management at Amundi SA, which manages about 1.3 trillion euros ($1.5 trillion).

The “euro has been suffering for quite a few years,” Kwok said. “The political risk has diminished a lot and the economic momentum is getting better, and so now is the time for the euro to get back from the undervaluation level.”

U.S. Investors

U.S. investors will “increasingly look overseas for returns,” spurring flows into euro-denominated investments, said Lee Ferridge, head of macro strategy for North America at State Street Global Markets in Boston. They’ll probably do so without hedging against a weaker dollar, which would boost profits earned abroad, he said.

“The biggest potential driver of equity inflows into Europe would be U.S. investors,” which would tend to support the euro, said Alessio de Longis, a New York-based money manager in OppenheimerFunds Inc.’s global multi-asset group. That’s because dollar-based investors would have to buy euros in order to settle stock trades in the common currency, he said.

Euro three-month risk reversals, a barometer of medium-term directional bias, remain staunchly positive, with euro calls at premium levels last seen in 2009.

European Investors

Rising confidence in the European economy recovery gives investors there a good reason to buy assets closer to home, bolstering the euro, State Street’s Ferridge said.

The euro has shaken off its status as a second fiddle as European growth and inflation recovered, while political risks subsided after the election of French President Emmanuel Macron, spurring bets that the European Central Bank will pare stimulus.

Local investments allow traders to sidestep currency risk from overseas bets, said Amundi’s Kwok. He sees the euro rising to a range of $1.20 to $1.25 for the rest of the year and is keeping a close eye on whether Macron can implement economic reforms.

At the same time, European corporations that earn revenue in U.S. dollars will look to hedge against any gains in the euro, said Lindahl at A.G. Bisset.

Central Banks

Reserve managers could be another key buyer of euros in the months ahead, according to Kwok and State Street’s Ferridge. Central banks have boosted the euro’s share of their holdings in recent quarters after reducing holdings in 2014 and 2015 when concerns about Greek debt and political turmoil diminished its appeal as a reserve currency.

While the outlook for Europe has stabilized, U.S. political drama has escalated. Against this backdrop, reserve managers may opt to rebuild their euro holdings, which would cause yet more strength for the currency.

“The whole European project looks to be on stronger footing politically,” Ferridge said. In the U.S., “we have an administration that’s pretty inexperienced politically, and I think the changes that we’ve seen in the administration, the uncertainty, it’s not going to sit will with reserve managers. The euro would be a beneficiary from that.”

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.

Naira

Daily Naira Exchange Rates; Friday, March 5, 2021

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naira

Naira Exchange Rates; Friday, March 5, 2021

Naira remained pressured across key foreign exchange markets on Friday, March 5, 2021 as scarcity persists. The local currency traded at N480 to a United States Dollar at the parallel market on Friday morning while it exchanged at N675 to a British Pound and N582 to the European common currency.

Daily Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
05/03/2021 475/480 670/675 575/582 60/68 385/395 382/300
04/03/2021 475/480 665/672 574/580 60/68 385/395 382/300
03/03/2021 475/480 662/672 574/580 60/68 385/395 382/300
02/03/2021 475/480 662/672 574/580 60/68 385/395 382/300
01/03/2021 475/482 662/672 575/583 60/68 385/395 382/300
26/02/2021 475/482 660/672 575/583 60/68 385/395 382/300
25/02/2021 475/480 660/670 572/580 60/68 385/395 282/300
24/02/2021 475/480 655/670 570/580 60/68 385/395 282/300
23/02/2021 475/480 655/665 575/582 60/68 385/395 282/300
22/02/2021 475/480 652/660 575/580 60/68 385/395 282/300
19/02/2021 474/478 648/655 570/577 60/68 385/395 282/300
18/02/2021 472/477 645/655 570/575 60/68 385/395 282/300
17/02/2021 472/478 645/655 570/575 60/68 385/395 282/300
16/02/2021 465/473 645/652 565/570 60/68 385/395 282/300
15/02/2021 465/473 642/652 562/570 60/68 385/395 282/300
12/02/2021 465/473 642/650 562/570 60/68 385/395 282/300
11/02/2021 465/475 640/650 560/570 60/70 385/400 280/300
10/02/2021 472/478 645/652 565/575 60/70 385/400 280/300
09/02/2021 474/480 645/655 567/575 60/70 385/400 280/300
08/02/2021 474/480 645/655 567/575 60/70 385/400 280/300
05/02/2021 474/480 645/653 567/578 60/70 385/400 280/300
04/02/2021 474/480 645/653 567/578 60/70 385/400 280/300
03/02/2021 474/480 642/655 575/580 60/70 385/400 280/300
02/02/2021 474/480 642/655 575/580 60/70 385/400 280/300
01/02/2021 474/480 642/655 575/580 60/70 385/400 280/300
29/01/2021 474/480 642/652 575/580 60/70 385/400 280/300

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
05/03/2021 470/480 662/672 570/580
04/03/2021 470/480 662/672 570/580
03/03/2021 470/480 662/670 573/580
02/03/2021 470/480 660/669 573/580
01/03/2021 470/480 660/669 574/580
26/02/2021 470/480 660/669 574/580
25/02/2021 470/480 658/665 574/580
24/02/2021 470/478 654/660 570/578
23/02/2021 470/478 654/660 570/578
22/02/2021 470/477 650/656 570/577
19/02/2021 465/476 645/656 565/573
18/02/2021 465/475 640/652 563/570
17/02/2021 465/477 640/655 562/572
16/02/2021 460/475 640/652 562/570
15/02/2021 460/475 638/652 561/568
12/02/2021 467/475 635/650 562/570
11/02/2021 465/475 640/655 560/575
10/02/2021 472/478 640/655 565/575
09/02/2021 472/478 640/655 565/575
08/02/2021 472/478 640/655 565/575
05/02/2021 472/478 640/650 565/575
04/02/2021 472/478 640/650 565/575
03/02/2021 471/478 640/650 572/580
02/02/2021 471/478 640/655 572/580
01/02/2021 471/478 640/655 572/580
29/01/2021 471/477 640/648 570/579

Central Bank of Nigeria’s Official Naira Rates

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Naira

Naira Hits Record Low of N427 Against the United States Dollar on I&E FX Window

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Nigeria 1000 notes

Naira Exchanges at N427 Against the United States Dollar on I&E FX Window

The Nigerian Naira plunged to as low as N427.45 against the United States Dollar on the Investors and Exporters Foreign Exchange Window on Thursday, March 4, 2021.

The local currency pulled back to N406.50 a US Dollar but opened lower at N412.50 on Friday morning.

Investors traded $66.99 million during the trading hours of Thursday.

At the black market section of the foreign exchange, Naira traded at N480 against the United States Dollar while the British Pound was exchanged at N673.

The Euro common currency remained unchanged at N580, the same rate it exchanged on Monday.

Despite the surge in the oil price to N67 per barrel and a series of forex policies, the Central Bank of Nigeria continues to struggle with low dollar liquidity across the board.

Nigeria’s foreign reserves declined by about $1 billion in one month as Africa’s largest economy struggles with the weak fiscal buffer necessary to mitigate COVID-19 impacts and deepen productivity.

It would be recalled that the Central Bank of Nigeria adjusted its diaspora foreign remittance policy to curb rising foreign exchange rates and put an end to black market transactions hurting the nation’s local currency value.

However, since the new policy was enacted in November 2020, forex scarcity remained pervasive with diaspora remittance inflow expected to decline by $2 billion in 2020.

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Naira

Daily Naira Exchange Rates; Thursday, March 4, 2021

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interbank

Naira Exchange Rates; Thursday, March 4, 2021

Naira exchanged lower against global counterparts on Thursday morning as scarcity persists across forex segments. Naira traded at N480 to United States Dollar on the black market while to a British Pound it sold for N672 as shown below.

Daily Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
04/03/2021 475/480 665/672 574/580 60/68 385/395 382/300
03/03/2021 475/480 662/672 574/580 60/68 385/395 382/300
02/03/2021 475/480 662/672 574/580 60/68 385/395 382/300
01/03/2021 475/482 662/672 575/583 60/68 385/395 382/300
26/02/2021 475/482 660/672 575/583 60/68 385/395 382/300
25/02/2021 475/480 660/670 572/580 60/68 385/395 282/300
24/02/2021 475/480 655/670 570/580 60/68 385/395 282/300
23/02/2021 475/480 655/665 575/582 60/68 385/395 282/300
22/02/2021 475/480 652/660 575/580 60/68 385/395 282/300
19/02/2021 474/478 648/655 570/577 60/68 385/395 282/300
18/02/2021 472/477 645/655 570/575 60/68 385/395 282/300
17/02/2021 472/478 645/655 570/575 60/68 385/395 282/300
16/02/2021 465/473 645/652 565/570 60/68 385/395 282/300
15/02/2021 465/473 642/652 562/570 60/68 385/395 282/300
12/02/2021 465/473 642/650 562/570 60/68 385/395 282/300
11/02/2021 465/475 640/650 560/570 60/70 385/400 280/300
10/02/2021 472/478 645/652 565/575 60/70 385/400 280/300
09/02/2021 474/480 645/655 567/575 60/70 385/400 280/300
08/02/2021 474/480 645/655 567/575 60/70 385/400 280/300
05/02/2021 474/480 645/653 567/578 60/70 385/400 280/300
04/02/2021 474/480 645/653 567/578 60/70 385/400 280/300
03/02/2021 474/480 642/655 575/580 60/70 385/400 280/300
02/02/2021 474/480 642/655 575/580 60/70 385/400 280/300
01/02/2021 474/480 642/655 575/580 60/70 385/400 280/300
29/01/2021 474/480 642/652 575/580 60/70 385/400 280/300

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
04/03/2021 470/480 662/672 570/580
03/03/2021 470/480 662/670 573/580
02/03/2021 470/480 660/669 573/580
01/03/2021 470/480 660/669 574/580
26/02/2021 470/480 660/669 574/580
25/02/2021 470/480 658/665 574/580
24/02/2021 470/478 654/660 570/578
23/02/2021 470/478 654/660 570/578
22/02/2021 470/477 650/656 570/577
19/02/2021 465/476 645/656 565/573
18/02/2021 465/475 640/652 563/570
17/02/2021 465/477 640/655 562/572
16/02/2021 460/475 640/652 562/570
15/02/2021 460/475 638/652 561/568
12/02/2021 467/475 635/650 562/570
11/02/2021 465/475 640/655 560/575
10/02/2021 472/478 640/655 565/575
09/02/2021 472/478 640/655 565/575
08/02/2021 472/478 640/655 565/575
05/02/2021 472/478 640/650 565/575
04/02/2021 472/478 640/650 565/575
03/02/2021 471/478 640/650 572/580
02/02/2021 471/478 640/655 572/580
01/02/2021 471/478 640/655 572/580
29/01/2021 471/477 640/648 570/579

Central Bank of Nigeria’s Official Naira Rates

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