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Forex

Investors Jump Back Into the Euro as Going Short Proves ‘Lethal’

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Euro currency
  • Investors Jump Back Into the Euro as Going Short Proves ‘Lethal’

Hedge funds. Asset managers. Central banks. These are just some of the players in the $5.1 trillion-a-day currency market who are buying the euro after shunning it over the past three years.

The shared currency has snapped its losing streak to become the best performer among Group-of-10 peers in 2017. After plunging to a 14-year low in January, the currency has staged a stunning comeback, rising to $1.1910 on Aug. 2, a level not seen since January 2015.

“To be short euros here is absolutely lethal,” said Ulf Lindahl, chief executive officer of A.G. Bisset Associates, who manages about $1 billion from Norwalk, Connecticut. He expects the currency to rise to $1.30 by the end of the year, if not sooner. Even after its 3.6 percent rally in July, investors and analysts are predicting further gains. So who’s buying euros, and why?

Hedge Funds

Hedge funds initially missed out on the euro rally by holding net-bearish bets until May before jumping in, according to data from the U.S. Commodity Futures Trading Commission. Since then, speculators have piled headlong into bullish bets, building up the biggest net-long position in six years.

Fast-money traders who use momentum and trend-following strategies were well positioned for the rally, said James Kwok, London-based head of currency management at Amundi SA, which manages about 1.3 trillion euros ($1.5 trillion).

The “euro has been suffering for quite a few years,” Kwok said. “The political risk has diminished a lot and the economic momentum is getting better, and so now is the time for the euro to get back from the undervaluation level.”

U.S. Investors

U.S. investors will “increasingly look overseas for returns,” spurring flows into euro-denominated investments, said Lee Ferridge, head of macro strategy for North America at State Street Global Markets in Boston. They’ll probably do so without hedging against a weaker dollar, which would boost profits earned abroad, he said.

“The biggest potential driver of equity inflows into Europe would be U.S. investors,” which would tend to support the euro, said Alessio de Longis, a New York-based money manager in OppenheimerFunds Inc.’s global multi-asset group. That’s because dollar-based investors would have to buy euros in order to settle stock trades in the common currency, he said.

Euro three-month risk reversals, a barometer of medium-term directional bias, remain staunchly positive, with euro calls at premium levels last seen in 2009.

European Investors

Rising confidence in the European economy recovery gives investors there a good reason to buy assets closer to home, bolstering the euro, State Street’s Ferridge said.

The euro has shaken off its status as a second fiddle as European growth and inflation recovered, while political risks subsided after the election of French President Emmanuel Macron, spurring bets that the European Central Bank will pare stimulus.

Local investments allow traders to sidestep currency risk from overseas bets, said Amundi’s Kwok. He sees the euro rising to a range of $1.20 to $1.25 for the rest of the year and is keeping a close eye on whether Macron can implement economic reforms.

At the same time, European corporations that earn revenue in U.S. dollars will look to hedge against any gains in the euro, said Lindahl at A.G. Bisset.

Central Banks

Reserve managers could be another key buyer of euros in the months ahead, according to Kwok and State Street’s Ferridge. Central banks have boosted the euro’s share of their holdings in recent quarters after reducing holdings in 2014 and 2015 when concerns about Greek debt and political turmoil diminished its appeal as a reserve currency.

While the outlook for Europe has stabilized, U.S. political drama has escalated. Against this backdrop, reserve managers may opt to rebuild their euro holdings, which would cause yet more strength for the currency.

“The whole European project looks to be on stronger footing politically,” Ferridge said. In the U.S., “we have an administration that’s pretty inexperienced politically, and I think the changes that we’ve seen in the administration, the uncertainty, it’s not going to sit will with reserve managers. The euro would be a beneficiary from that.”

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.

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Naira

Black Market Dollar Rate Reaches ₦1,380 Today, May 3rd, 2024

US dollar to Nigerian Naira exchange rate as of May 3rd, 2024 at the black market stood at 1 USD to ₦1,380

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New Naira notes

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 3rd, 2024 stood at 1 USD to ₦1,380.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,350 and sold it at ₦1,340 on Thursday, May 2nd, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

  • Buying Rate: ₦1,380
  • Selling Rate: ₦1,370

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.

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Naira

Dollar to Naira Black Market Today, May 2nd, 2024

As of May 2nd, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,350 NGN in the black market, also referred to as the parallel market or Aboki fx.

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on

New Naira Notes

As of May 2nd, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,350 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,310 and sell it at N1,300 on Monday, April 29th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

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

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

  • Buying Rate: N1,350
  • Selling Rate: N1,340

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Forex

Yen’s Plunge Persists Despite Japan’s Late New York Trading Intervention

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yen

Japan’s attempts to shore up the yen faced yet another setback as the currency continued its downward spiral despite a late intervention in New York trading.

Despite efforts by Japanese authorities to stem the yen’s decline, traders remained unfazed, indicating a growing skepticism towards the efficacy of such measures.

The yen, which had initially weakened as much as 1.1% against the dollar during Asia trading, stubbornly clung to its downward trajectory, inching closer to levels seen before the suspected intervention.

Speculations ran rife among traders regarding Japan’s involvement in the currency market after witnessing abrupt fluctuations in the yen’s value during the final stretch of the US trading session.

This recent development underscores a deepening challenge for Japanese policymakers grappling with the yen’s persistent depreciation.

Despite their best efforts, the market sentiment appears to be increasingly immune to intervention tactics, casting doubts on the effectiveness of such measures in the long run.

Shoki Omori, chief desk strategist at Mizuho Securities Co., weighed in on the situation, remarking, “Japan’s finance ministry likely intervened but couldn’t break 152, where investors used to be cautious.”

He further noted, “Now that authorities are seen as having stepped in for a second time but gave the impression that they cannot stop the yen cheapening trend alone, market participants will likely feel more comfortable to short yen.”

The prevailing sentiment among traders suggests a growing consensus that Japan’s interventions may be insufficient to halt the yen’s depreciation trend.

Despite the authorities’ concerted efforts, the currency’s plunge persists, signaling a broader challenge for policymakers in navigating the complexities of the global currency market.

As the yen’s decline continues unabated, market participants remain on high alert, bracing for further volatility in the days ahead.

The inability of intervention measures to reverse the currency’s downward trajectory raises questions about the effectiveness of traditional policy tools in an increasingly interconnected and unpredictable financial landscape.

In the face of mounting challenges, Japanese authorities may find themselves compelled to explore alternative strategies to address the yen’s persistent weakness.

Whether through unconventional policy measures or coordinated efforts with global counterparts, finding a sustainable solution to stabilize the yen remains a pressing priority for policymakers amid evolving market dynamics.

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