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Forex

Dollar Builds Toward Six-week High Ahead of U.S. Jobs Data

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  • Dollar Builds Toward Six-week High Ahead of U.S. Jobs Data

The dollar edged toward a six-week high on Friday before monthly U.S. jobs data that investors hope will shed light on how much longer the Fed’s aggressive rate-hiking cycle will continue.

The greenback is outperforming other major currencies as the U.S. economy continues to grows strongly while recent data in other large economies, including the euro zone, has come in below expectations.

Investors are watching for signs of increasing U.S. inflation as companies including Amazon (AMZN.O) raise minimum wages. Friday’s non-farm payrolls release for September will give new indications of wage growth and labor market strength.

The dollar index .DXY, which measures its performance against a basket of six currencies, was 0.1 percent higher on the day at 95.804.

Private payrolls data came in stronger than forecast on Thursday, pushing the yield on the benchmark 10-year U.S. Treasury note US10YT=RR to its highest levels since May 2011.

“We have downplayed the relevance of the U.S. labor market report for the dollar … but the data might become more significant again now there is debate over how much longer the [Fed] rate hike cycle will continue,” said Antje Praefcke, a currency strategist at Commerzbank in Frankfurt.

The U.S. central bank foresees another interest rate hike in December, three more next year, and one increase in 2020.

Fed Chairman Jerome Powell on Wednesday talked up the U.S. economy, saying that the United States is on the verge of a “historically rare” era of ultra-low unemployment and tame prices.

That spooked investors and caused U.S. Treasury yields and the euro/dollar currency pair to breach key technical levels.

AUSSIE FALLS TO MULTI-YEAR LOW

The Australian dollar AUD=D4, often viewed as a barometer of risk appetite, slipped 0.3 percent to $0.7054, a 32-month low, as U.S. yield spreads continued to widen, pressuring stock markets and risk appetite around the world.

The Aussie, extending losses into a fourth straight session, has now fallen 2.1 percent this month.

The euro EUR=EBS edged down 0.1 percent to $1.1497 after brushing a six-week low of $1.1463 during Thursday’s session.

The dollar will continue to strengthen against the euro as well as the yen, with the common currency likely slipping back below the psychologically-significant $1.15 handle, said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The euro is down about 0.8 percent against the dollar this month.

Sterling rose to a 3-month high versus the euro on Friday after European Union Brexit negotiators said that a divorce deal with Britain was “very close”.

The pound rose to 88.14 pence EURGBP=D3, its highest since 9 July, on the report which cited two diplomatic sources.

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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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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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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