The Nigerian naira’s exchange rate to the US dollar has remained a cause for concern as the exchange rate hovered around N1000/$1.
Earlier this week, Investors King reported that the exchange rate had weakened to N983/$1, but several social media sources indicate it reached as high as N1000/$1.
Meanwhile, on peer-to-peer (P2P) platforms, it is trading at N984 as of the latest update. Officially, the exchange rate closed at N770.7/$1 on the NIFEX window.
The Central Bank of Nigeria (CBN) had announced a plan to clear a $10 billion foreign exchange backlog within two weeks, with Acting Governor Folashodun Shonubi stating that commercial banks would play a significant role in the process.
However, liquidity issues in the market have raised doubts about the feasibility of this plan.
Operators in the forex market have reported disarray, with many licensed bureau de change operators struggling to access dollars for trading. This scarcity has led to the emergence of various exchange rates, including rates on platforms like Binance and Dubai, reflecting the market’s complexity.
Experts, speaking at a recent Nairametrics ClubHouse session, expressed skepticism about the CBN’s timeline to improve forex liquidity, emphasizing the need for a well-executed strategy rather than short-term promises.
Adding to the complexity, the exchange rate depreciation coincides with President Tinubu’s trip to New York, where he seeks foreign direct investment for Nigeria. US Deputy Secretary of Treasury Wally Adeyemo mentioned the importance of Nigeria’s macroeconomic framework to attract such investments.
As Nigeria grapples with forex scarcity, the government faces the challenge of restoring confidence in its economic stability to attract much-needed foreign investments.
Dollar Sees Uptick, But November Nears Steepest Monthly Decline in a Year
Euro Weakens as Weak French Data Fuels Rate Cut Speculation
The euro faced a decline and German government bonds experienced an upswing following disappointing French economic data, intensifying speculations about potential rate cuts by the European Central Bank (ECB).
The euro exhibited a 0.4% weakening against the dollar while ten-year bund yields dropped four basis points, indicating growing anticipation of an earlier initiation of ECB interest-rate reductions in the coming year.
The Stoxx 600 index slightly receded, marking a moderate adjustment to its most impressive month since January. Concurrently, US equity futures maintained stability with minimal changes.
US Treasuries, however, experienced a brief pause in their November rally as investors awaited further signals regarding the potential timing of a shift towards rate cuts in the upcoming year.
The upcoming data on Thursday is projected to demonstrate a deceleration in the personal consumption expenditures price index, the Federal Reserve’s preferred inflation metric.
“The PCE inflation data for October is most likely going to echo what we already saw in the October CPI and PPI reports and add to the soft-landing narrative,” stated Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho International Plc in London.
The French economy contracted by 0.1%, coupled with a decline in November inflation to the lowest level this year.
Markets are now pricing in a quarter-point reduction in ECB rates by April.
Investors are closely watching for signals from Fed Chair Jerome Powell’s speech on Friday, considering it a potential litmus test for market sentiment and the Fed’s stance on monetary policy.
Analysts caution against excessive optimism in the market, urging prudence in evaluating the forward curve and expecting clarity from Powell’s statements later this week.
Dollar Hits Four-Month Low as Rate Cut Speculations Grow
The US dollar extended its decline, reaching the lowest level since early August as swap traders increased bets on a Federal Reserve interest rate cut as early as May.
The Bloomberg Dollar Spot Index registered its fifth consecutive day of losses, reflecting concerns about a potential recession and dovish comments from the Fed that are prompting investors to speculate on a reversal of the central bank’s aggressive tightening cycle.
Global Head of Currency Strategy at Brown Brothers Harriman & Co., Win Thin, emphasized the dollar’s vulnerability, stating, “The dollar remains vulnerable until we see a shift in market expectations for the Fed, and that may be a 2024 story.”
He added, “With the dollar rally stalled, it will take some firm real sector data to challenge the current dovish Fed narrative.”
Amid these developments, the New Zealand dollar led gains among Group-of-10 peers, propelled by the central bank’s warning of potential rate hikes in the coming year.
Simultaneously, the Japanese yen strengthened to a two-month high as concerns about elevated US rates diminished.
The prevailing narrative suggests that unless there is a notable change in market expectations for the Fed, the dollar is likely to remain under pressure, with potential shifts anticipated in 2024.
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