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Trading USDJPY and NZDJPY Ahead of Japan’s Election

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  • Trading USDJPY and NZDJPY Ahead of Japan’s Election

Prime Minister Shinzo Abe called a snap election last month to further strengthen his power now that the main opposition Democratic Party is in complete shambles.

While the October 22 election will test Abe’s popularity in Japan, the Prime Minister is widely expected to win. However, the usual uncertainty that associates with politics and financial market plunged the Japanese Yen across board on Friday. But not against the New Zealand dollar as explained here.

USDJPY

The US dollar rose against most of its counterparts on Thursday after the Senate adopted 2018 fiscal budget in a move widely regarded as a show of unity ahead of President Donald Trump’s proposed tax reform.

“This now allows for the passage of large-scale Tax Cuts (and Reform),” Trump tweeted Friday, saying that Paul will vote for tax cuts.

Rand Paul is the Republican Senator from Kentucky that voted against the budget.

Accordingly, this announcement bolstered US dollar attractiveness against the Japanese Yen to 113.51, its highest price level since July.

USDJPYWeekly

Fundamentally, both the US dollar and Japanese Yen are strong. However, political uncertainty weigh on the Yen in the near term, at least pending election outcome.

Therefore, USDJPY may touch 114.43 resistance level per adventure Shinzo Abe lose the election or win with a slight margin that gives voice to the opposition in parliament. A convincing victory would strengthen Yen against the US dollar to 111.81 support.

NZDJPY

The Japanese Yen maintained its gain against the New Zealand dollar as both nations are in the midst of electoral transition.

While New Zealand First coalition, the ruling New Zealand party, is yet to announce its economic plan. The market believes it would revolve around immigration cut and subsequently low economic growth.

Trading USDJPY and NZDJPY Ahead of Japan's Election

The negative perception of the coalition party dampened the currency attractiveness, even against the Japanese yen. A positive outcome in Japan on Sunday would likely plunge this pair further below the ascending channel, a close below the 78.83 support level should reinforce sellers’ interest towards 76.25 targets in coming days. A strong economic team in New Zealand and poor outcome from Japan on Sunday would void this analysis, otherwise, I will expect bearish continuation.

Read: NZDJPY Heading Towards Target

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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