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Forex Weekly Outlook August 14-18

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  • Forex Weekly Outlook August 14-18

Currencies of developed nations plunged last week following Donald Trump’s response to North Korean missile threat. Deepening global uncertainties further. However, these uncertainties have increased emerging economies attractiveness, especially haven assets.

The renewed interest in the emerging assets has bolstered the attractiveness of emerging currencies as investors looks to avert volatility ahead of North Korean threats.

This week GBPJPY and CADJPY top my list.

GBPJPY

The United Kingdom economy remains subdued as the nation strives to negotiate its way out of the European Union. Since the U.K voted to leave the European Union, the inflation rate has jumped above the Bank of England’s 2 percent target to 2.6 percent year on year, pushing input costs to a 3-month high in July. While consumer spending declined by 0.8 percent year-on-year.

The surge in prices is weighing on new investments, especially with the BOE not kin on hiking rate to support new job creation and growth. Pound sterling remains unattractive and it is expected to get worse as global uncertainty intensifies.

Again, while Japan is pulling up missile shield its assets continued to gain with Japanese yen rising to 8-week high of 108.70 against the US dollar and 7-week high of 141.24 against the pound. Also, the Japanese economy has expanded for a fifth consecutive quarter in the first quarter of 2017. Giving it an edge over other Group-7 economies.

Forex Weekly Outlook August 14-18

Since this pair called the top at 147.75 five weeks ago, it has lost 651 pips to close below 20-day moving average and 142.42 key support last week. This week, I will be looking to sell this pair below the ascending trending for 139.90 support levels, target 1. A sustained break should open up 129.85, our target 2.

CADJPY

The Canadian economy has expanded substantially since its manufacturing and labour market increased following interest rate hike by the Bank of Canada. However, the uncertainties in the US and the global market continued to hurt Canadian economic outlook. This includes loonie.

The Canadian currency has lost 426 pips in the last three weeks. Indicating that not just the slump in global commodities that is hurting the loonie but also the weakness in the U.S. economy. It’s largest trading partner.

CADJPYWeekly

Therefore, this week, I will be looking to sell this pair below 86.36 price levels for 83.11 support levels and expect the continued decline in Canadian dollar and surge in the attractiveness of the Japanese yen to propel the pair towards 80.27, target 2.

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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New Naira notes

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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