Connect with us

Dollar

Bank of America Says US Dollar Will Strengthen Throughout 2021 For 5 Key Reasons

Published

on

United States Dollar - Investors King Ltd

Bank of America Says US Dollar Will Strengthen Throughout 2021 For 5 Key Reasons

Uncertainties surrounding the US dollar’s path in 2021 are fading and bulls might finally have their day in the sun, Bank of America said Tuesday.

Strategists led by Athanasios Vamvakidis boosted their forecast for the US currency on Tuesday, expecting it to strengthen to 1.15 dollars per euro by the year-end. The forecast compares to Wall Street’s consensus of a 1.25 exchange rate.

A higher euro-dollar rate means a weaker greenback, as more of the US currency can be purchased with a single euro. The currency pair already trades at the bank’s first-quarter forecast of 1.20, down from roughly 1.23 at the start of the year. The team already expected upside for the dollar later in the year, but now sees several reasons why such strengthening can arrive sooner.

Detailed below are the five reasons Bank of America expects the dollar to strengthen in 2021.

The Fed-ECB gap

After taking several actions to pump dollars into the struggling US economy, the Federal Reserve is starting to near the end of its ultra-easy policy stance. Some officials have started talking about tapering the central bank’s asset purchases. The Fed quickly rebuffed concerns of premature tightening, but the mixed communication suggests policy normalization could arrive early next year, the strategists said.

It’s a different story on the other side of the Atlantic. The European Central Bank has taken on more intense rhetoric against Euro strength in recent weeks. A strategic review of how the bank can reach its inflation target will likely reveal new tools for adding Euros to the economy.

“The bottom line is that the ECB will be moving towards more easing, while the Fed will be looking towards policy normalization,” the team said.

Stimulus boost

The Biden administration continues to move toward passing its $1.9 trillion stimulus proposal without Republican support in a bid to supercharge the US economic recovery. While such a large fiscal relief package does weaken the dollar somewhat, it also increases the risk of earlier policy normalization by the Fed, the strategists said. In all, the measure should support the dollar’s strength, they added.

Fiscal policy in the European Union, however, is “not as supportive and if anything could be tightened too early,” the team said.

Faster growth

The global economy is expected to rebound in 2021 as widespread vaccination brings an end to the coronavirus pandemic. Still, Bank of America’s strategists expect US growth to handily outpace that of the EU.

The team projects growth of 6% in 2021 and 4.5% the following year, exceeding the consensus estimates of 4.1% and 3.5%, respectively. EU growth is estimated to reach 2.9% this year and 3.4% in 2021, the strategists said.

Inflation in the US is projected to similarly come in above price growth in the EU.

The US’s decoupling from the EU economy should support the dollar as US spare capacity fades and the rates market prices in early Fed normalization, the team said.

Dollar shorts

The dollar could be the next asset to face a massive short squeeze following the GameStop phenomenon in January, Bank of America said. The market continues to short the dollar despite the currency’s recent rally.

If the team’s projections are right and the US economy outpaces the EU’s, selling of the euro-dollar trade will likely cut into long positions and strengthen the dollar, the strategists said.

Return of the safe haven

The risk-on party that’s lifted stocks through the year-to-date won’t last forever, and a reversal stands to push more investors into cash positions, the team said. Bank of America expects positioning in risk assets to peak in the first quarter before policy support hits its limit the following quarter. A 10% market correction is forecasted to arrive sometime this year and shake investors’ appetite for stocks, they added.

Starting the year with assets at record highs “does not leave much room for further upside,” the bank said. The relatively slow pace of global vaccination means it could take years to fully emerge from the COVID-19 crisis. Realization of the long path to recovery should prop up the dollar in the near term, according to Bank of America.

“A more challenging outlook for risk assets this year also suggests a less clear foreign-exchange picture and upside USD risks,” the strategists said.

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.

Continue Reading
Comments

Dollar

NAFEM Dollar Sales Plummet to $84.1m, Naira Dips to N1,537/$

Published

on

U.S dollar - Investors King

On Friday, the Nigeria Autonomous Foreign Exchange Market (NAFEM) witnessed a substantial decline in dollar sales, plummeting to $84.1 million from the previous day’s $331.1 million, representing a 74% drop.

Concurrently, the value of the Nigerian naira depreciated, falling to N1,537 against the US dollar compared to N1,498 recorded in the preceding trading session.

Data sourced from the FMDQ Security Exchange revealed that the drastic reduction in forex turnover at NAFEM reflects dwindling activities in the foreign exchange market.

Despite the participation of entities such as commercial banks, the Central Bank of Nigeria (CBN), oil firms, and multinationals in dollar sales, the overall transaction volume experienced a notable contraction.

Throughout the week, the forex supply at NAFEM exhibited fluctuations. It commenced with a modest supply of $116.11 million on Monday, surged to $381.92 million on Tuesday, but regressed to $117.87 million by Wednesday.

Thursday witnessed a slight recovery with supply climbing to $336.11 million.

Market analysts attributed the depreciation of the naira to intensified demand for dollars driven by speculation and individuals seeking foreign currency for various purposes including business, tourism, education, and healthcare.

The widening gap between official and parallel market rates raises concerns about potential round-tripping activities.

Despite recent CBN interventions and policy directives aimed at enhancing forex supply and curbing malpractices, challenges persist in the forex market.

The evolving dynamics underscore the need for sustained efforts to stabilize the currency and foster confidence in Nigeria’s financial ecosystem. As stakeholders monitor market developments, attention remains focused on implementing effective measures to mitigate forex volatility and sustain economic stability.

Continue Reading

Dollar

Dollar to Naira Black Market Exchange Rate Today 19th December 2023

Published

on

New Naira notes

What is the Dollar to Naira exchange rate at the parallel market, known as the black market (Abokifx) today? As of December 19th, 2023, the dollar to naira exchange rate is 1 USD to 1235 NGN at the black market.

This means that for every one US dollar, you can exchange it for ₦1235, Investors King reports.

This digital business news platform has obtained the official dollar to naira exchange rate in Nigeria today including the Black Market rates, Bureau De Change (BDC) rate, and CBN rates.

How Much is Dollar to Naira Today in the Black Market?

This rate is subject to change depending on a variety of factors including global economic trends, political developments, and market fluctuations. However, you can buy and sell 1 USD at ₦1235 and ₦1230 as of the time of writing today.

What is the current exchange rate of the dollar to naira in the black market today?

According to Investors King, as of the time this report was filed, a dollar can be purchased at the Lagos parallel market (black market) for ₦1235 and sold for ₦1230.

Exchange Rate of Dollar To Naira in Black Market Today?

Dollar to Naira (USD to NGN) Black Market Exchange Rate Today
Selling Rate 1230
Buying Rate 1235

Central Bank of Nigeria (CBN) Naira Exchange Rates for Banks

Investors King understands that although the dollar to naira opened at N1235 per $1 in the parallel market today, the Central Bank of Nigeria (CBN) does not acknowledge the parallel market, also referred to as the black market. The CBN has instructed individuals in need of forex to approach their bank as the I&E window is the sole recognized exchange.

On Tuesday, December 19th, 2023, individuals in the black market purchased one US dollar for N1230 and sold it for N1235. This shows that the value of the Naira declined when compared to Monday, December 11th, 2023 when the local currency was exchanged at N1190 to a Dollar and a Dollar was purchased at N1180.

To stay informed about the dollar to naira exchange rate, there are several reliable sources that you can turn to. Here are some tips for staying up-to-date:

  • Check the Central Bank of Nigeria’s website: The CBN is responsible for regulating the country’s monetary policy and is a reliable source for the latest exchange rates. You can check their website regularly for updates.
  • Follow financial news outlets: Financial news outlets such as Investors King, Bloomberg, Reuters, and CNBC provide regular updates on the global currency markets, including the dollar to naira exchange rate.
  • Use online currency converters: There are a number of online currency converters that allow you to quickly and easily check the exchange rate between the dollar and the naira.
  • Follow social media accounts of financial experts: Following social media accounts of financial experts such as analysts, economists, and financial advisors can give you valuable insights into the latest trends in the currency markets.

By staying informed about the dollar-to-naira exchange rate, you can make informed decisions when buying or selling foreign currencies. Whether you are a business owner looking to trade in foreign currencies or an individual looking to invest in the currency markets, knowledge of the latest exchange rates is key to success. Keep these tips in mind and stay informed about the latest trends in the global currency markets.

Continue Reading

Dollar

Dollar Sees Uptick, But November Nears Steepest Monthly Decline in a Year

Published

on

US Dollar - Investorsking.com

The dollar made modest gains on Thursday, but it still faces the prospect of marking its most significant monthly decline in a year.

This trend is largely attributed to heightened speculation that the Federal Reserve will refrain from further rate hikes, a sentiment reinforced ahead of a crucial inflation report scheduled for later in the day.

The dollar index, gauging the U.S. currency against six counterparts, managed to climb 0.35% to 103.18, rebounding from Wednesday’s low of 102.46—the weakest level since August 11.

Despite this slight recovery, the index is on track to conclude November with a 3.3% slump, fueled by mounting expectations of a Fed interest rate cut in the first half of 2024.

Mohamad Al-Saraf, Associate of FX and Rates Strategy at Danske Bank, noted, “The key drivers in November for the dollar weakness have been the benign inflation data and the loosening signs of the labor market.”

Market focus intensifies as investors await the crucial Personal Consumption Expenditure (PCE) price index, the Fed’s targeted measure of inflation, scheduled for release on Thursday.

Christopher Wong, Currency Strategist at OCBC, emphasized that the PCE data would offer insights into the persistence of the disinflation trend.

As U.S. rates futures markets price in over 100 basis points of rate cuts for next year, commencing in May, the dollar’s path remains contingent on inflationary signals and cues from Federal Reserve Chair Jerome Powell’s speech on Friday.

The global economic landscape, underscored by weaker data in Germany, Spain, and France, amplifies the volatility in currency markets, leaving investors closely monitoring central bank responses.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending