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Stocks Drift at Record Highs; Dollar Rally Pauses

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Stock - Investors King
  • Stocks Drift at Record Highs; Dollar Rally Pauses

Stocks drifted with investors assessing the magnitude of recent gains in global equities as a deadline on Catalonia’s independence claim from Spain loomed and China kicked off its twice-in-a-decade Communist Party Congress.

Equities in Asia were mixed with volumes subdued, despite fresh records for U.S. stocks, as investors parsed Chinese President Xi Jinping’s 3 1/2-hour long speech that started the week-long event. European stock-index futures indicated a muted start to trading. The dollar’s rally from the start of the week petered out as traders tracked Nafta developments. Xi said China was pushing through reforms in a systematic way as he warned of “severe” challenges and laid out a road map to turn the nation into a leading global power by 2050.

The Bloomberg dollar index fluctuated in a narrow range. Negotiations over the future of the North American Free Trade Agreement were extended into the first quarter of 2018 in a bid to resolve differences with Canada and Mexico. That sent the Mexican peso more than 1 percent higher on Tuesday and it was holding those gains.

The euro was steady after recovering from a slide when Spain cut its growth forecast for 2018, acknowledging the impact of an escalating political crisis in Catalonia, a region that accounts for a fifth of the country’s output. Catalonia has until Thursday to back down from a challenge to secede.

Markets have been stable with a lack of volatility going into the start of China’s Communist Party Congress. However, in the past the meetings coincided with an average 3.3 percent drop on the benchmark Shanghai Composite Index and a further 3.3 percent in the following five trading days. The reaction on Wednesday was muted: the yuan barely inched higher as did the Shanghai Composite Index.

U.S. President Donald Trump’s choice for the next chair of the Federal Reserve, which has been a focus for markets in recent weeks, will be unveiled before he leaves Nov. 3 for an 11-day trip to Asia and Hawaii, a person familiar with the process said Tuesday. John Taylor was said to have impressed Trump in an interview, buoying gains in the greenback earlier this week given the assumption by many that he would favor tighter policy. Trump also tried to rally support for his tax plan in a speech on Tuesday.

Here are the main moves in markets:

Stocks

  • Japan’s Topix index closed less than 0.1 percent higher in Tokyo. Australia’s S&P/ASX 500 Index ended flat, while South Korea’s Kospi index was also little changed.
  • Hong Kong’s Hang Seng Index inched lower, while the Shanghai Composite Index was up 0.1 percent.
  • Euro Stoxx 50 futures were steady.
  • Futures on the S&P 500 Index were little changed. The underlying gauge rose 0.1 percent to close at a fresh all-time high in New York.
  • The MSCI Asia Pacific Index was little changed as was the MSCI Emerging Market Index after dropping 0.5 percent in the previous session.

Currencies

  • The Bloomberg Dollar Spot Index was steady.
  • The euro was at $1.1769 after falling 0.3 percent on Tuesday.
  • The pound was at $1.3179. It slipped 0.5 percent on Tuesday after Governor Mark Carney said the Bank of England is making contingency plans for a “hard” exit from the European Union.
  • The yen fell 0.1 percent to 112.33 per dollar.
  • The New Zealand dollar fell 0.3 percent to 71.52 U.S. cents. New Zealand First will be in a position on Thursday afternoon to make an announcement on a government.

Bonds

  • The yield on 10-year Treasuries was little changed at 2.3 percent.
  • Australia’s 10-year yield fell four basis points to 2.72 percent.
  • German 10-year bund yields were steady at 0.36 percent.

Commodities

  • West Texas Intermediate climbed 0.3 percent to $52.03 a barrel.
  • Gold was little changed at $1,283.97 an ounce.

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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Forex

IMTOs Drive 38.86% Rise in Foreign Exchange Inflows to $1.07bn in First Quarter of 2024

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Naira Exchange Rates - Investors King

Foreign exchange inflows into Nigeria surged by 38.86% to $1.07 billion in the first quarter of 2024, according to the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin.

This increase is attributed to the enhanced contributions from International Money Transfer Operators (IMTOs).

In January, IMTOs facilitated inflows amounting to $383.04 million. This figure dipped slightly to $322.83 million in February but rebounded to $363.70 million by March, this upward trend represents a 10.74% growth from the previous quarter of 2023.

The surge in forex inflows comes at a critical time for Nigeria, as the country continues to grapple with economic challenges, including inflation and a fluctuating naira.

The increased foreign exchange reserves are expected to provide much-needed stability to the naira and bolster Nigeria’s economic standing in the global arena.

CBN Governor Dr. Olayemi Cardoso has underscored the importance of remittances from the diaspora, which constitute approximately 6% of Nigeria’s GDP.

The recent approval of licenses for 14 new IMTOs is seen as a strategic move to enhance competition and lower transaction costs, thereby encouraging more remittances to flow through formal channels.

“We recognize the significant role that IMTOs play in our foreign exchange ecosystem,” Dr. Cardoso remarked during a recent press briefing.

“The inflows we’ve seen are a testament to the effectiveness of our strategy to engage with these operators and ensure that more remittances are channeled through official avenues.”

The CBN has also introduced measures to facilitate IMTOs’ access to naira liquidity at the official window, aiming to streamline the settlement of diaspora remittances.

This initiative is part of the broader effort to stabilize the forex market and address the persistent challenges of foreign currency availability.

The bulletin also revealed that the inflow from IMTOs has contributed significantly to Nigeria’s overall forex reserves, which are crucial for economic stability and growth.

Analysts suggest that the increased remittances will support the naira, providing relief amidst the country’s ongoing economic adjustments.

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Forex

CBN Resumes Forex Sales as Naira Hits N1,570/$ at Parallel Market

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US Dollar - Investorsking.com

The Central Bank of Nigeria (CBN) has resumed the sale of foreign exchange to eligible Bureau De Change (BDC) operators.

The decision was after Naira dipped to N1,570 per dollar in the parallel market,

CBN announced that it would sell dollars to BDCs at a rate of N1,450 per dollar. This decision aims to address distortions in the retail end of the forex market and support the demand for invisible transactions.

Following the CBN’s intervention, the dollar, which recently traded as low as 1,640 per dollar, has shown signs of stabilization.

The apex bank’s action is expected to inject liquidity and restore confidence among market participants.

BDC operators have welcomed the move. Mohammed Magaji, an operator in Abuja, noted that the dollar was selling at 1,630 per dollar.

He emphasized the market’s volatile nature but expressed optimism about the CBN’s intervention.

Aminu Gwadebe, President of the Association of Bureau de Change Operators of Nigeria, attributed the naira’s decline to acute shortages, speculative activities, and increased demand due to recent duty waivers.

He praised the CBN’s action as a necessary step to alleviate market pressures.

The CBN’s efforts include selling $20,000 to each eligible BDC, with a directive to limit profit margins to 1.5% above the purchase rate.

This strategy aims to ensure that end-users receive fair rates and to curb inflationary pressures.

The CBN’s ongoing reforms seek to achieve a market-determined exchange rate for the naira. As the naira continues to navigate turbulent waters, stakeholders remain hopeful that these measures will lead to a more stable and liquid forex market.

Market analysts suggest that sustained interventions and increased access to foreign exchange could help reverse the naira’s downward trend.

The CBN’s actions demonstrate a commitment to tackling the challenges facing the foreign exchange market and supporting Nigeria’s economic stability.

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Finance

Nigeria’s FX Inflows Leap 57% as CBN Steers Economic Confidence

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U.S dollar - Investors King

Nigeria’s foreign exchange (FX) inflows have surged by 57% over the past year, signaling newfound stability for the Naira.

Analysts attribute this growth to the Central Bank of Nigeria’s (CBN) consistent policies, which have bolstered investor confidence and enhanced market stability in Africa’s most populous nation.

Data from the CBN reveals that FX inflows rose to $8.86 billion in February 2024, compared to $5.66 billion in February 2023.

This increase is a testament to the effectiveness of the CBN’s strategic measures. Similarly, foreign exchange turnover skyrocketed 180% year-on-year to $240.64 million in February 2024.

“The upsurge in FX inflows reflects the positive impacts of increased interest rates and the relative stability of the exchange rate,” said Ayokunle Olubunmi, head of financial institutions ratings at Agusto Consulting.

He noted that high interest rates in Nigeria are attracting investors seeking better returns compared to developed countries.

The CBN has actively engaged with foreign investors, addressing concerns and providing insights into monetary policy actions.

Olayemi Cardoso, the CBN governor, emphasized that investor confidence has been restored, partly due to the bank’s clearance of a $7 billion foreign exchange backlog.

New investments into Nigeria also increased significantly, reaching $1.24 billion in February 2024, compared to $0.33 billion in January 2024. This uptick is indicative of a more stable and attractive investment climate.

Analysts point out that improved oil production and higher global oil prices have significantly boosted FX earnings.

Also, government policies aimed at attracting foreign investment, along with strategic management of the exchange rate, have played pivotal roles in this economic revival.

The CBN’s efforts to diversify the economy and boost non-oil exports are starting to yield results.

Increased diaspora remittances, facilitated by better official channels and incentives, have further contributed to the rise in FX inflows.

While challenges remain, the positive trend in FX inflows suggests a more robust and stable economy, encouraging further investment.

Consistent and transparent economic policies are expected to enhance investor trust, stabilizing the Naira and fostering a more favorable exchange rate environment.

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