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Forex

Dollar Dips Despite U.S. Tariff Fears as Brexit Hopes Lift Pound

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U.S dollar - Investors King
  • Dollar Dips Despite U.S. Tariff Fears as Brexit Hopes Lift Pound

The dollar edged down on Thursday after a bounce in European currencies but investors said concerns about U.S. President Donald Trump imposing further tariffs on Chinese imports could lift the greenback.

Trump could impose levies on $200 billion more of Chinese imports on Thursday when a public comment period on the new tariffs ends.

That would represent a significant ramping up of the trade war between the world’s two largest economies and lift the dollar which has become a principal haven for investors seeking shelter from the conflict.

The greenback on Thursday, however, edged down 0.1 percent against a basket of major currencies to 95.121.

Traders said that was because of gains made by sterling after Bloomberg reported on Wednesday that Germany would accept a less detailed agreement on Britain’s future ties with the EU to get a Brexit deal done.

Germany denied that its position on Brexit had changed though sterling still traded up 0.2 percent against the dollar at $1.2925.

“The dollar continues to face residual pressure from the buoyant pound amid the latest speculation over Brexit. How long this lift could last remains to be seen, but it is prompting buy backs of other European currencies like the euro and Swiss franc for now,” said Takuya Kanda, general manager at Gaitame.com Research.

SWEDISH CROWN PRESSURED

Elsewhere, the Swedish crown sank 0.7 percent versus the euro after the Swedish central bank kept rates unchanged and closed the door for a rate hike in October.

The Swedish currency fell last week to a nine-year low against the euro on concern about an approaching election and growing investor conviction that interest rates may not rise until well into 2019.

The crown has weakened more than any other developed-world currency this year, falling 12 percent against the dollar. The Swedish central bank is expected to be among the last to end stimulus policies dating from the 2008 financial crisis.

“The krona may struggle to rally much even with the Riksbank continuing to indicate a rate hike is coming later this year,” said Kit Juckes, global head of FX strategy at Societe Generale.

“There are buyers of the currency ahead of this weekend’s election on the grounds that the vote won’t change the underlying support of a near 4 percent current account surplus … but the global backdrop is definitely pulling the other way,” he added.

In contrast to the Riksbank and other European central banks, the United States Federal Reserve has been steadily raising borrowing costs since late 2015, lending support to the dollar.

The greenback’s more than 6 percent rise against its rivals over the past six months has hit emerging market currencies hard.

An index of emerging market currencies is trading at more than one-year lows amid fears those currencies would be hit by the global trade conflict as it negatively affects their export-oriented economies.

Argentina’s peso, which has lost more than 50 percent of its value this year, saw a rare pause in losses overnight.

Helping to restore some investor confidence, Argentine Economy Minister Nicolas Dujovne said on Tuesday he believed a deal to release early disbursements from a $50 billion standby loan agreement with the IMF could be put to its board by the end of the month.

The Argentine peso closed up more than 1 percent at 38.52 per dollar on Wednesday.

Elsewhere, the Australian dollar was flat at $0.7196.

As with the previous day, when strong gross domestic product data did not provide much of a lift, Thursday’s economic indicators were unable to prop up the Aussie.

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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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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