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Dollar Slips Across Board on Monday on Rising COVID-19 Cases

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Global debt

Dollar Trades Lower as Concern Over Second Wave of COVID-19 Deepens

The United States dollar slipped on Monday as investors remained concerned over the rising number of COVID-19 confirmed cases in the US and the rest of the world.

The world’s largest economy that recently announced additional stimulus to further boost economic recovery and support small businesses reported more than 30,000 new cases on Friday and Saturday, making it the highest daily totals since May 1, according to data compiled by Johns Hopkins University.

“We expect the FX markets to remain caught between recovering economic indicators and concerns about a second-wave of COVID-19 infections in the week ahead,” analysts at Barclays stated on Monday

Sameer Goel, a chief macro strategist at Deutsche Bank,  Asia, said the big question for investors right now on US dollar is the greenback should be trading at a safe-haven risk premium as concerns rise over a potential second wave of virus infections.

During the Asian trading session, the US dollar index stood at 97.503 against a basket of currencies, down from 96.5 it traded earlier in the month.

Against the British Pound, the US dollar pulled back slightly after plunging for the last 8 days as shown below.

GBPUSDDaily

Tope Pete, a currency trader, who spoke with our correspondent on GBPUSD pair, said “1.2175 is an area of interest on the daily chart for the cable. It is an area that lies around the 38.2 percent fibo level of 2019 high (1.3513 of Dec 13, 2019) and 2020 low (1.1640 of Mar 2020).

“As can be seen on this daily chart, a bearish candle pattern for a reversal in an uptrend market was completed on June 11, 2020, right beneath the 61.8 percent fibo region of the aforementioned high and low area. An entry at the end of the candle pattern formation would have given a sell entry at the opening of June 12, 2020 candle with Targets at the 50 percent area (1.2465) and 38.2 percent area (1.2210).

“However, for those who couldn’t get in at the aforementioned entry, a further selloff is been anticipated while entries will only be confirmed with a strong bearish candle reversal pattern along the 50 percent region where it currently is.

“A strong bullish run above the 1.2720 area totally invalidates this setup.

“As the UK government looks to ease down on the COVID-19 guidelines on social distancing, more business will open up for transaction and this could help the UK economy make a good spring.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Forex

Again CBN Devalues Naira by N6 Ahead of World Bank’s $1.5bn Loan Request

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Naira Dollar Exchange Rate

The Central Bank of Nigeria (CBN) has once again devalued the Nigerian Naira by N6 to the United States Dollar, making it the third time the apex bank will adjust the Naira exchange rate this year.

The devaluation brings the CBN closer to actualising foreign exchange unification demanded by the International Monetary Fund (IMF) in April before the $3.4 billion loan was approved.

This same condition was enforced by the World Bank as a prerequisite for approval of $1.5 billion loan request submitted by the Federal Government. The loan the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said she was positive it would be approved by the multilateral institution in the next meeting given that the Federal Government has met all the conditions for the said loan.

24 hours later, the apex bank devalued the Naira official rate by N6 from N379/US$ to N385/US$. While the International Money Transfer Service Operators (IMTOs), all authorised dealers, bureau de change operators and service providers were asked to add N6 across all rates.

The rate for IMTOs against the US dollar has now moved from N382 to N388. Meaning banks will now sell dollar to the CBN at N389, up from the previous N383 to us dollar.

Again, the Central Bank sale of dollar to the bureau de change operators was pegged at N390 to dollar, against the old N384 to US dollar.

The apex bank, therefore, directed the BDCs to sell at not more than N392 per dollar to end-users. The old rate was N386 to a US dollar.

The CBN circlar reads in part, “Weekly Exchange Rate For Disbursement of Proceeds of International Money Transfer Service Operators’ pegged IMTOs sale of dollar to banks at N388 to dollar; banks sale of dollar to CBN at N389 to dollar and CBN sale of dollar to BDCs at N390 to dollar. The BDCs are now expected to sale to end-users at not more than N392 to dollar and each BDC is entitled to buy $10,000 weekly”.

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Forex

More Problem for CBN as Naira Approaches N500/US$ at the Black Market

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Forex Weekly Outlook March 6 - 10

Naira plunged against the United States Dollar to a record low of N495 at the black market on Thursday despite the Central Bank of Nigeria saying it has enough financial means to meet forex demands.

The Naira declined by N12 from N483 it exchanged on Monday amid persistent scarcity and high demands by importers and businesses looking to offset COVID-19 losses with the usual December high demand sales.

Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), on Tuesday blamed the wide foreign exchange rate at the black market on speculators and hoarders looking for personal gain at the expense of the nation.

He went on to caution experts using black market rates to analyse the local currency performance to stop and claimed that section of the forex only accounts for 5 percent of the nation’s total foreign exchange transactions.

While that might be true, it is also true that majority of manufacturers and businesses have turned to the black market for their forex needs in recent months, especially after it became obvious that the apex bank does not have enough liquidity to service the economy.

The nation’s foreign reserves has been battered by the weak oil prices and the continuous production cut by OPEC and allies to artificially support low prices. Nigeria’s foreign reserves is presently hovering between $35 billion and $36 billion after plunging from $45 billion attained in June 2019, according to the latest data from the Central Bank of Nigeria.

Against the British Pound, the Nigerian Naira depreciated by N15 to N635 from N620 it exchanged on Monday. Another indication of chronic forex scarcity as the local currency also plunged to N580 against the European common currency, the Euro.

The wide forex is expected to further weigh on the nation’s inflation rate and consumer spending this December.

On Tuesday, the apex bank left the interest rate unchanged at 11.5 percent and attributed the rising inflation rate to structural policies, the recent #EndSARS protest and a surging fuel price.

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Forex

Naira Gains N1 to N483 Against US Dollar as CBN Warned Speculators of Impending Doom

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Naira Remains under pressure

The Central Bank of Nigeria on Tuesday warned speculators and hoarders of the United States Dollar against creating artificial forex scarcity for personal gain.

Godwin Emefiele, the Governor of the Central Bank of Nigeria, said black market forex rates does not reflect the economic reality of the Nigerian Naira as that section of the forex is tainted with bribes and individuals looking to profit at the expense of the nation.

We do not agree that the determining factor for our currency should be based on a market that is tainted, where people go to offer bribes,” he stated during a virtual monetary policy committee briefing in Abuja.

The Nigerian Naira gained N1 against the United States dollar to trade at N483 at the parallel market also known as the black market, up from N484 it traded on Monday.

Emefiele said “The black market is illegal where people do not provide documentation to support transactions. It is unfortunate and unfair for analysts to say Nigeria’s exchange rate is at 480 per dollar.”

The Association of Bureau De Change Operators of Nigeria (ABCON) agreed with the central bank, saying speculators and currency hoarders are responsible for the wide forex rates. The association warned that speculators are going to lose money given that the apex bank has foreign reserves of $36 billion to support the local currency and meet forex demands.

The apex bank left the interest rate unchanged at 11.5 percent to further stimulate growth in the real sector and speed up the recovery process with cheaper loans. Other ratios were left unchanged as well.

Speaking on the rising inflation rate, Godwin Emefiele attributed the 14.23 percent increase in consumer prices to the rising pump price, the recent #EndSARS protest and structural policies.

Therefore, it looks like the apex bank will damn rising inflation for the first time to focus on economic productivity, new job creation and general growth.

The Naira CBN official rate remains $379 to a United States Dollar while it exchanged at N385 on the Investors and Exporters Forex Window on Tuesday.

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