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The Pound Remains Highly Vulnerable – Despite Recent Gains

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pound

Pound Remains Vulnerable, Says Green

The pound remains highly vulnerable- despite rising sharply in recent days – and families and investors need to avoid complacency about possible significant drops, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from Nigel Green, CEO and founder of deVere Group, comes as the pound sterling hits a 12-week high against the euro and new yearly highs against the U.S. dollar.

Mr Green says: “The pound has been on a pretty impressive run lately as investors’ appetite for risk has improved, supported in part by stronger than expected data.

“However, it’s essential that a close eye is kept on the trajectory of the pound as they could be caught off guard if their investment portfolio is not properly diversified.

“Right now, complacency should be avoided amid real and growing concerns that a sell-off could be on the horizon.”

He continues: “The threat of major tax hikes being announced in the UK’s Budget in November, and the stalled Brexit trade negotiations, which are really up against the clock now, are important reasons to remain cautious on the pound.

“Also, the UK started the pandemic with government debt at a higher level than many other G10 nations.  This has grown considerably due to the fiscal support required to protect the economy during the lockdown.

“Against this backdrop, there are valid questions on the longer-term sustainability of the pound’s outperformance so far this quarter.”
A significant drop in the value of the pound would contribute to reducing people’s purchasing power and a drop in living standards, observes Mr Green.

“Weaker sterling means imports are more expensive, with rising prices being passed on to consumers.

“The fall in the pound is good for exports some claim, but it must be remembered that around 50% of UK exports rely on imported components. These will become more expensive as the pound falls in value.

“A low pound is, of course, bad news for British holidaymakers and travellers going abroad, and also expats who receive UK pensions or income from Britain.”

He adds: “In addition, one of the UK’s most important sectors, financial services, will suffer from another knock to the pound because it is built on foreign investment that puts its faith in a strong pound.”

The deVere CEO concludes: “The pound is highly vulnerable with major issues looming that could affect its value.

“These need to be monitored to mitigate risks and to take advantage of the opportunities when they arise.”

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.

Naira

Naira Closed at N411.25 to US Dollar at NAFEX Window

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Naira Dollar Exchange Rate - Investors King

The Nigerian Naira declined further against the U.S Dollar on Tuesday ahead of the Ramadan holiday to trade at N411.25 to a single U.S Dollar at the Nigerian Autonomous Foreign Exchange (NAFEX) window.

The local currency plunged as low as N420.23 per dollar during the trading hours of Tuesday despite opening the day at N410.33/US$ before settling at N411.25 to a US dollar.

Investors on the window exchanged $98.33 million on Tuesday.

At the parallel section of the foreign exchange, Naira traded at N483 to a United States Dollar; N673 to a British Pound and N580 to a Euro.

Foreign exchange rates remained largely unchanged at the bureau de change section, with the Naira trading at N482 to a U.S Dollar; N674 to a British Pound and N584 to a Euro.

Several factors continue to weigh on the Nigerian Naira, especially with the foreign reserves hovering around record low and crude oil output not at an optimal level.

Other factors like rising inflation rate and drop in economic activity due to COVID-19 effect on the economy and lack of enough fiscal buffer to cushion the economy.

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Naira

Daily Naira Exchange Rates; Thursday, May 6, 2021

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Naira Exchange Rates - Investors King

Naira depreciated further at the parallel market on Thursday as the local currency traded at N485 to a United States Dollar. The Nigerian Naira exchanged at N676 to a British Pound and N585 to a Euro as shown below.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
06/05/2021 480/485 665/676 575/585 62/69 395/405 292/320

Bureau De Change Naira Rates

Date

USD

GBP

EURO

NGN

BUY/SELL

BUY/SELL

BUY/SELL

06/05/2021

475/482

663/676

575/587

06/05/2021

475/482

663/676

575/587

Central Bank of Nigeria’s Official Naira Rates

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Forex

CBN Extends N5/$ Incentive Period to Boost Dollar Inflow

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has extended the N5 per US Dollar incentive on forex remittance indefinitely to boost liquidity and further deepen economic recovery.

The initiative was scheduled to end on May 8. It was introduced to encourage recipients of dollars to use formal banking channels and help the central bank capture such inflows to boost the stability of the local currency, which has been under pressure after oil prices plunged last year.

“We hereby announce the continuation of the scheme until further notice,” the regulator said in a statement on its website on Thursday.

The naira has been devalued three times since last year after a sharp drop in oil earnings, which accounts for 90% of foreign-exchange inflows, and remittances from workers abroad led to a dollar crunch in the West African nation, which produces the most crude in Africa. The local unit traded for 410.31 on the investors and exporters window, also called Nafex, as of 8:51 a.m. in Lagos.

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