A potential U.K. exit from the European Union next week may have far-reaching implications for the $5.3 trillion-a-day currency market. Add to that list Japan’s currency strengthening to levels that spark speculation about central bank intervention to counter the move.
The yen surged to the strongest in almost two years against the dollar this week as investors sought refuge before the June 23 British referendum. The rally prompted Finance Minister Taro Aso to express concern and call for coordination with foreign counterparts to address what he described as disorderly exchange-rate moves.
“They would be able to intervene,” Alan Ruskin, New York-based head of Group-of-10 currency strategy at Deutsche Bank AG, the world’s fourth-largest currency trader, said in an interview on Bloomberg Television. “If the yen was moving through 100 against the dollar and there were some Brexit-related events, then I could certainly see the Bank of Japan saying ‘Look here guys, we’re subject to all these external forces.’”
The Bank of Japan refrained this week from adding to stimulus, even as policy makers seek to bolster economic growth, which would benefit from a weaker yen making exports more competitive. Japan’s currency has rallied more than 15 percent against the dollar this year on haven demand from global economic turmoil, with hedge-fund positioning reaching the most bullish in six years.
Japan’s currency rose 2.6 percent this week, reaching 103.55 per dollar, the strongest level since August 2014. It added 2.4 percent to 117.47 per euro.
The premium for one-month options to buy the yen versus the greenback, over the cost of contracts to sell, widened to about 3 percentage points on June 16, the most since 2010, according prices compiled by Bloomberg. The gap was at 2.8 on Friday.
Analysts at Standard Bank Group Ltd., Prudential Financial Inc., Royal Bank of Canada, Bank of Tokyo-Mitsubishi UFJ Ltd. and Toronto-Dominion Bank said they are on watch for yen intervention.
“The most likely catalyst for that would be a Brexit outcome, in my view, which would lead potentially to very high volatility in foreign-exchange markets,” said Shahab Jalinoos, global head of foreign-exchange strategy at Credit Suisse Group AG in New York.
Aso, who is also deputy prime minister, said Friday that he wants to take “firm action” in line with Group-of-Seven and G-20 agreements on avoiding unstable currency markets.
Yet there’s no indication from the G-7 that they’re open to joint intervention. The last time Japan sold yen to restrain gains was in 2011, in a multilateral intervention following the devastating earthquake and tsunami.
Naira Remains Flat Against US Dollar, Euro
Naira Exchange Rate Remains Flat Against US Dollar and Euro on Black Market
The Naira remained unchanged on Tuesday despite the curfews and social unrest that grounded the nation’s economy.
Naira traded at N463 against the United States dollar on the black market on Tuesday morning, the same rate it exchanged on Thursday.
Against the European common currency, the Nigerian Naira exchanged at N540 to a single Euro.
However, the local currency dipped slightly against the British Pounds as it exchanged at N595 to a British Pound, representing a N3 decline from N592 it traded on Friday.
Social unrest amid weak economic fundamentals continued to weigh on Nigeria’s local currency, especially with Foreign Direct Investment expected to drop in the final quarter of the year through the first quarter of 2021.
This coupled with weak foreign reserves and a drop in global demand for crude oil is expected to compound Nigeria’s economic woes.
Lagos State governor, Babajide Sanwo-Olu, has said Nigeria’s commercial capital needs at least N1 trillion to fix the destruction and vandalisation that trailed the #EndSARS protest in the state. An amount equivalent to the state’s annual budget.
Experts, who spoke on the situation, said it would hurt the nation’s output and may plunge fourth-quarter GDP by as much as 6.9 percent. These rising uncertainties amid the second wave of COVID-19 and possible lockdown in key trading partners could further plunge Naira value against global counterparts in the fourth quarter of the year.
Transparent Exchange Rate Can Boost Nigeria’s Forex Inflow
Transparent Exchange Rate Can Improve Nigeria’s Diaspora Forex Inflow
Experts that gathered at a virtual summit organised by Ecobank Nigeria with a theme, ‘Financial Services & Remittance Solutions for Nigerians in Diaspora: Leveraging Ecobank’s Pan-African offering’, have said Nigeria can boost foreign exchange inflow through proper engagement and a transparent exchange rate.
Mr. Patrick Akinwuntan, Managing Director of Ecobank Nigeria, in his opening speech, said growing evidence has shown that diaspora remittances were positively impacting economies of various nations in the world.
Akinwuntan put the total annual remittances to Nigeria at around $20 billion per year, saying it boosts the nation’s foreign exchange earnings.
Speaking on how these remittances can be sustained, he said constant engagement with Nigerians abroad is imperative and it is the reason Ecobank is leveraging its digital technology through Rapidtransfer App and Ecobank mobile App to ensure affordable and easy transfer of funds by Nigerians abroad to their home country.
“Our dedicated Rapidtransfer, mobile remittance app is a game-changer for the market. It enables Africans and indeed Nigerians wherever they are to easily and instantly send money to bank accounts, mobile wallets and cash collection in – and across – 33 African countries.
“Historically, the cost of sending cross-border remittances to Africa has been far too high at about 6%-7%. Similarly, the process to send funds has long been inefficient and burdensome, with customers typically needing to go physically to an agent sometimes late in the night or in poor weather with attendant discomfort and risks.
“The Rapidtransfer app remittance solution is a quick, easy and reliable digital solution that removes all of these issues. It is indeed a game-changer for Nigerians and all Africans with its sustainable and standout affordability,” he said.
Speaking on transaction charges, the Ecobank Managing Director said transfer fee range from zero to about 3 percent as compared to 6 – 7 percent charge elsewhere.
He added that the bank’s instant transfer and transparent exchange rate is a unique factor its competitors do not possess.
Naira to Dollar Rate Today: Naira Exchanges at N463 to Dollar on Black Market
Naira to Dollar Rate on Black Market Today Stood at N463
The Nigerian Naira to dollar rate slid slightly against the United States dollar on Tuesday on the black market as social unrest continues to weigh on the nation’s economic outlook.
The local currency lost N1 against the US dollar to N463 while against the British pound it remains pressured at N592.
This decline continues against the European Union’s common currency, the Euro. The Naira traded at N540 to a single Euro on the black market.
Naira to dollar rate plunged amid rising economic uncertainties and unclear policy path caused by both COVID-19 and government limited fiscal buffers to cushion the negative impacts of the virus on Africa’s largest economy.
This coupled with the ongoing social unrest by the Nigerian youths to force decorum across the Nigerian Police Force and call global attention to decades of systemic intimidation and harassment of innocent citizens.
The Nigerian Stock Exchange has been closing flat since Thursday and continued this week, suggesting that investors are concerns and wary of eventualities as they look to safeguard their investments.
Again, the projected third-quarter recession, low foreign revenue generation, weak consumer spending and the rising cost of living are some of the factors hurting the Nigerian Naira outlook.
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