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South African Reserve Bank Imposes Administrative Sanctions on Authorised Dealer in Foreign Exchange with Limited Authority

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South African Rand - Investors King

The South African Reserve Bank (SARB) has imposed administrative sanctions on Master Currency (Pty) Limited, an Authorised Dealer in foreign exchange with limited authority (ADLA).

Authorised Dealers in foreign exchange (commercial banks) and ADLAs are persons authorised by the SARB to deal in foreign exchange transactions and are regulated accordingly. ADLAs include bureaux de change and are authorised to deal only in certain limited, designated foreign exchange transactions, including travel-related transactions.

The Financial Intelligence Centre Act 38 of 2001 (FIC Act) mandates the SARB to ensure that ADLAs have adequate controls in place to combat acts of money laundering and the financing of terrorism. Flowing from these responsibilities, the SARB inspects ADLAs to assess whether they  have  appropriate measures in place,as required by the FIC Act.

The administrative sanctions were imposed after the SARB conducted inspections at Master Currency (Pty) Limited, in terms of the FIC Act. The inspections found weaknesses in the control measures the ADLA, Master Currency (Pty) Limited, had in place to control anti-money laundering and combating the financing of terrorism.

It should be noted that the administrative sanctions were imposed because of certain weaknesses that were detected in the ADLA’s control measures which inhibited the ADLA from proactively detecting financial crime, and not because it was found to have facilitated transactions involving money laundering or the financing of terrorism.

The administrative sanctions imposed are as follows:

  • a financial penalty of R100 000 in terms of section 45C(3)(e) of the FIC Act, for failing to provide ongoing training to employees to comply with the provisions of such Act in terms of section 43 thereof; and
  •  a directive in terms of section 45C(3)(c) of the FIC Act, to provide the requisite refresher training at all branches, and to submit confirmation and evidence that such training has been conducted and will continue to be conducted on an annual basis.

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.

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Forex

CBN Raises Customs Forex from N381/US$1 to N404.97/US$

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The Central Bank of Nigeria has raised the Naira exchange rate for cargo clearance from N381/US$1 to N404.97/US$1.

This was confirmed by Uche Ejesieme, the Public Relations Officer (PRO), Tin Can Island Customs Command.

The PRO explained that it was not the customs job description to raise the foreign exchange rate but that of the central bank.

The N24 difference has been implemented on the customs system managed by Web Fontaine.

Commenting on the situation, Kayode Farinto, the Vice President of the Association of Nigerian Licensed Customs Agents, said the increase would further escalate inflation on import goods and hurt consumers’ buying power given the present economic situation.

An importer, Gboyega Adebari, who was shocked at the decision said stakeholders will be greatly affected by the decision.

According to him, “When we went to assess a job this morning, we were told that the exchange rate has been increased, though we have been expecting it, but we don’t expect that it would be so sudden. The implication of this on cargo clearance is that cost of clearance would increase by N24 difference.

“The cargoes that already enroute Nigeria would also be affected, the jobs that we want to clear this morning were affected.

“When you go back to the importer and request for money, they will tell you there is no notification of increase from customs, so the freight forwarders are the ones that would bear the additional cost.”

Naira plunged to N502 against the United States Dollar at the parallel market on Wednesday and traded at N715 to a British Pound and N605 against the European common currency, Euro.

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Naira

Naira Hits N502 Against U.S Dollar at the Black Market

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Naira - Investors King

Persistent dollar scarcity amid devaluation and economic uncertainties plunged the Nigerian Naira to N502 per U.S Dollar at the parallel market, popularly known as the black market.

The local currency traded at N715 to a British Pound and N605 to a Euro on Wednesday morning.

At the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology (NAFEX), the Naira opened at N411.15 to a United States Dollar before dropping to as low as N421.96 and eventually closing at N411.5.

The Central Bank of Nigeria had adopted the NAFEX rate as the nation’s official rate when it became clear that the apex can no long sustain Naira’s fixed-rate amid dwindling foreign reserves and weak revenue generation.

The NAFEX rate, popularly known as the Investors and Exporters Forex Window, was quoted as N410.15 to a United States Dollar on Tuesday, June 8, 2021 on the central bank’s official website.

The apex bank decision to devalue the Naira despite the ongoing economic challenges in Africa’s largest economy was because of the pressure from the World Bank and the International Monetary Fund, demanding the federal government to allow forces of demand and supply to determine the naira exchange rate against pegged Naira-USD rate.

However, with the Federal Government looking for approval from the two multilateral institutions for fresh loans, it became necessary to enforce those demands before new loan applications could be approved.

The World Bank raised Nigeria’s growth rate from 1.1 percent to 1.8 percent in 2021, saying a series of structural reforms and market-determined exchange rates will help boost economic activities.

Also, oil prices were projected to remain high in the near term.

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Dollar Struggles for Momentum as Markets Wait for Inflation Data

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U.S Dollar - Investors King

The dollar stabilised on Monday after dropping on Friday following lower-than-expected U.S. jobs data, and currency markets broadly lacked momentum as investors looked ahead to key inflation data later this week.

Friday’s jobs data was seen as a relief for markets, showing a pick-up in job growth was not strong enough to raise expectations for the U.S. Federal Reserve to tighten its monetary policy any sooner, and this hurt the dollar.

There was little movement in major currency pairs during the early European session on Monday. World shares were trading near record highs.

At 1125 GMT, the dollar index was flat on the day at 90.141. The euro was down 0.1% against the dollar, at $1.2159.

The Australian dollar, which is seen as a proxy for risk appetite, was up 0.2% versus the U.S. dollar at 0.77535 .

“After Friday, we’re looking at a foreign exchange market that’s still got no reason for the Fed to change its tune, so we’ve still got accommodative monetary policy in the United States,” said Kit Juckes, head of FX strategy at Societe Generale. “But on balance we’re getting more optimistic about the global economic and health outlooks.”

Market participants were focused on U.S. inflation data and the European Central Bank meeting, both on Thursday.

Dovish rhetoric from ECB policymakers suggests the bank is in no hurry to slow the pace of buying under the 1.85 trillion euro ($2.24 trillion) Pandemic Emergency Purchase Programme (PEPP).

But U.S. Federal Reserve policymakers have begun inching toward a discussion about winding that help back.

“A divergence has opened up recently between the ECB and Fed who have signalled a willingness to discuss QE tapering at upcoming meetings,” MUFG currency analyst Lee Hardman wrote in a note to clients. “It will help dampen upward momentum for EUR/USD. However, the developments are not sufficient to alter our bullish outlook the pair beyond the near-term.”

Speculators decreased their net short dollar positions in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

China’s yuan hovered around the key 6.40 level, with the offshore yuan changing hands at 6.3960.

China’s export growth missed forecasts and imports grew at their fastest pace in 10 years in May, fuelled by surging demand for raw materials. read more

“In general, the trade sector continues the strong performance indicating that the manufacturing sector remains the leading role in the post-pandemic recovery,” wrote Commerzbank senior economist Hao Zhou in a note.

“However, the trade data might have little FX market impact, as the authorities vow to keep a stable currency for the time being.”

Elsewhere, the United States, Britain and other rich nations reached a deal on Saturday to squeeze more money out of multinational companies such as Amazon and Google and reduce their incentive to shift profits to low-tax offshore havens.

Investors were wary of how tech stocks would react, in terms of currency markets, but ING strategists wrote in a note to clients that the plans for a minimum global corporate tax rate of at least 15% could result in a repatriation of global capital over a longer term which would be positive for the dollar.

“Our thoughts here are that the removal (of) tax havens could have implications for the hundreds of billions of dollars of cash parked overseas by US multi-nationals – reducing the incentives to keep cash overseas,” they said.

In cryptocurrencies, bitcoin was up 2% around $36,535 , while ether was up 4.2% at $2,825 . Both were trading within the month’s relatively narrow ranges.

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