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Euro Falls to 10-month Low After Italy Debt Selloff

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  • Euro Falls to 10-month Low After Italy Debt Selloff

The euro fell on Tuesday to a 10-month low after a selloff in Italy’s debt market drove investors to dump the single currency.

A deepening political crisis in Italy, the euro zone’s third biggest economy, provoked selling of Italian assets and the euro that was reminiscent of the euro zone debt crisis of 2010-2012.

But the impact was not felt as keenly on currency markets as in Italian government bonds which suffered their worst day in more than 25 years.

Italy’s president has set the country on a path to fresh elections by appointing a former International Monetary Fund official as interim prime minister, with the task of planning for snap polls and passing the next budget

Investors fear a polarising election campaign which could deliver a deeply eurosceptic government, threatening the bloc’s cohesion.

The euro has fallen 4 percent this month amid a resurgent dollar and rising concerns over the euro zone’s political and economic situation.

The currency slipped on Tuesday below $1.16 for the first time since November 2017 to hit the 10-month low of $1.1510 and weakened significantly against the safe haven Swiss franc and Japanese yen.

The Danish crown, which is pegged to the euro, strengthened 0.1 percent against the single currency in a further sign of a fallout from Italy.

“A surging dollar has weakened the euro but now it is all about risks from Italy and the impact the crisis there could have on the European Central Bank’s monetary policy,” said Commerzbank analyst Ulrich Leuchtmann.

“The underlying problem here isn’t Italy, though, but a fundamental question about the euro zone, a political experiment lacking a fiscal union which can fail if fair growth and wealth are not achieved,” he said.

Financial markets expect the ECB to wind down its 2.55 trillion-euro stimulus programme by the end of this year and raise its policy interest rate towards the middle of next year.

Weaker-than-expected economic data out of the euro zone, however, has raised questions about that.

DOLLAR INDEX UP

Viraj Patel, a currency strategist at ING in London, noted that the spillover effect on the euro from the Italian bond markets was limited but said that could change if the selloff forces investors to dump other peripheral debt.

The euro is set for its biggest monthly drop in more than three years, according to Thomson Reuters data.

The closely-watched Italian-German 10-year bond yield spread, seen by many investors as an indicator of sentiment towards the euro zone, was at its widest level since June 2013..

With a decline in U.S. Treasury yields also weighing, the dollar dropped about 0.6 percent on Tuesday to a three-week low of 108.730 yen.

On Monday the dollar rose briefly to 109.830 yen as U.S.-North Korea summit plans appeared back on track.

The dollar index against a basket of six major currencies was up half a percent on the day at 95.025, hitting a 6-1/2 month high.

But the renewed dollar strength was less a function of increasing U.S. inflation expectations than a mirror image of euro lows, said Ken Odeluga, a market analyst at City Index.

The Australian dollar, sensitive to shifts in risk sentiment, was down 0.3 percent at $0.7525.

Analysts at MUFG said that if tightening financial market conditions abroad begin to feed back into the U.S. domestic economy, that could become a problem for the Federal Reserve.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Forex

Akinwumi Adesina Extols Africans in Diaspora on Cross-Border Remittance

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Akinwunmi Adesina - Investors King

African Development Bank (AfDB) President, Akinwumi Adeshina has extolled the tenacity and impacts of Africans in Diaspora on cross-border remittance.

According to the AfDB President, Africans in the diaspora are the continent’s largest financiers through their yearly remittances.

Speaking at an event organised by the Bank in collaboration with the African Union Commission, Adeshina noted that cross-border remittance into Africa is more than development assistance to the continent. 

Investors King earlier reported that remittance into Nigeria and other countries in the sub-Sahara Africa region hits $53 billion in 2022.

The AfDB President said, “The value of remittances from the African diaspora doubled from $37 billion in 2010 to $87 billion in 2019, reaching $95.6 billion by 2021. Yet official development assistance to Africa in 2021 was $35 billion, or 36% of the remittances from the diaspora”.

Adeshina added that Egypt and Nigeria are among the top-ten remittance recipients globally, with $31.5 billion and $19.2 billion, respectively in 2021. 

While speaking on the advantage of cross-border remittance to the African continent, the AfDB president noted that remittances have helped to meet financial, food, education, and health needs of many Africans, “it as well as serve as countercyclical sources of finance,” he said.

“The African diaspora has become the largest financier in Africa! And it is not debt, it is 100% gifts or grants, a new form of concessional financing that is the key for livelihood and security for millions of Africans” he added.

Similarly, Adeshina further positioned the need to eliminate premium charges on cross-border remittance into Africa. He noted that cross-border into Africa is twice what is it for South Asia.

He concluded that the Africans in diaspora can add more than remittance and investment, noting that they have skills, knowledge and know-how which can be needed for the development of the continent.

“They can help build world-class universities, and they can be mentors for the new generation of Africans,” he said. 

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eNaira

E-Naira Transaction Volume Rises to N5 Billion in November Amid Intensified Campaign

More Nigerians embrace eNaira wallet as CBN takes adoption campaign across the nation

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The Central Bank of Nigeria, (CBN) has disclosed that e-Naira transaction volume rose to a record N5 billion in the month of November following a series of campaigns initiated to encourage adoption.

Investors King had earlier reported how the e-Naira adoption team visited a number of parks in Abuja and the University of Lagos among other locations to drive the adoption of the digital currency. 

Speaking at the Second Edition of the Africa Cashless Payment Conference, CBN’s Director of Information and Technology, Hajiya Rakiya Mohammed noted that transaction on the e-naira platform does not attract any charges. 

She stated that Nigeria’s financial ecosystem is large to accommodate everyone.

Hajia Rakiya added that the e-Naira platform can be operated in any of Nigeria’s major local languages, stating that onboarding onto the e-Naira platform is a simple process. 

She further stressed that the primary goal of the e-naira is to reduce the amount of cash in circulation, thereby downsizing the cost of producing paper currency, increase in revenue and direct disbursement to citizens.

Meanwhile, the e-Naira circulation has reached N401.82 million as more Nigerians embraced the digital currency. 

It could be recalled that on October 25, 2021, CBN launched the e-Naira making Nigeria the first African country to have a digital currency. 

During the unveiling of the e-Naira in Abuja, President Muhammadu Buhari stated that the digital naira would increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.

On his part, the CBN Governor, Godwin Emefiele disclosed that the e-Naira offered Nigerians endless possibilities in using financial services. 

While admonishing more Nigerians to embrace the digital naira, Hajia Rakiya noted that “both banked and unbanked can use it, and it can be done through USSD *997#. We have integrated it with telecoms and NIBBS instant payments plus integration with money transfer operations so you can use e-naira for cross border”.

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CBN Will Redesign Naira Notes Every Five to Eight Years; Say Emefiele

The central bank will henceforth redesign the nation’s legal tender every five to eight years

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New Naira Notes

Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele has said the bank will henceforth redesign the nation’s legal tender every five to eight years.

The apex bank governor revealed at the unveiling of the new naira notes on Tuesday. 

Godwin Emefiele explained that the naira redesign is in line with global best practice noting that the naira needed to be redesigned and re-issued every five to eight years.

According to the CBN governor, previous administrations lacked the political will to approve the redesign of the naira notes. Stating that it is regrettable that the naira has not been redesigned for the past 19 years. 

“In the past, I have to confess that attempts by the CBN to redesign and re-issue the naira notes have been resisted. It is only President Muhammadu Buhari that has exhibited the courage to do so,” the CBN governor stated. 

Emefiele added that going forward, naira notes will be redesigned at intervals to address some peculiar issues. 

 “After today, the CBN will begin to redesign and reissue the naira every five to eight years,” he said. 

Investors King had earlier reported that President Muhammadu Buhari unveiled the redesigned naira notes at the Federal Executive Council (FEC) meeting today. 

Among those who joined the president with the unveiling include the CBN governor and the EFCC chairman.

Recall, in October, the CBN announced it will redesign the N200, N500 and N1,000 notes in line with its mandate.

Meanwhile, the CBN governor has disclosed that the new naira notes can not be counterfeited because of the features embedded in them. 

Similarly, he added that security agencies would be monitoring people making withdrawals at the counter to sniff out money laundering and unravel illegal usage. 

“The CBN has moved to a cashless economy. We will restrain the volume of cash someone will withdraw over the counter. We will follow up with the person’s data to know the reason for such withdrawal,” he concluded.

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