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Dollar Drops to Two-Week Low Versus Yen as Treasury Yields Fall

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  • Dollar Drops to Two-Week Low Versus Yen as Treasury Yields Fall

The dollar dropped to a two-week low against the yen as traders pushed it through stops in thin trading amid a slide in Treasury yields.

The greenback weakened against all its major peers Thursday, with leveraged funds shorting the dollar against the yen as the currency pair continued a pull back from a 10-month high. Bloomberg’s dollar gauge posted a sharp retreat from gains earlier this week, after a strong five-year Treasury note auction Wednesday sent yields lower, sapping demand for the U.S. currency.

“On the rise we didn’t see any strong resistance, so it will be the same on the fall,” said Simon Pianfetti, a senior manager at the market solutions department at SMBC Trust Bank Ltd. in Tokyo. Stop-hunt below 116.55, the low set on Dec. 19, he said, adding that the next cluster of support lies at 115-115.25 yen.

The dollar has climbed about 11 percent against the yen since the U.S. election of Nov. 8 that swept Donald Trump to the presidency, the most among Group of 10 peers. The rally may be over-extended given that the S&P 500 Index and Treasury yields showed signs of topping out in mid-December when the Federal Reserve raised benchmark rates.

“Almost nobody believes Trump can implement everything he’s promised to do,” said Satoshi Okagawa, senior global market analyst at Sumitomo Mitsui Banking Corp. in Singapore. “At some point, Treasury markets will come to realize that, and yields will decline.”

  • USD/JPY sinks as much as 0.9% to 116.23
    • Slow stochastics bearish with %D falling. Read: Dollar-Yen Rally May Fizzle as Questions Over Trump’s Plans Grow
    • One-day yen repo rate for transactions starting next business day slides 16bps, most since Sept. 29, to -0.247%: Japan Securities Dealers Association
  • BOJ Governor Kuroda says government can’t relax as nation still isn’t in condition to hit 2% inflation target: Nikkei
  • Dollar rally is set to extend next year, and magnitude of gains may surprise bulls, says Todd Elmer, FX strategist at Citigroup
  • EUR/USD rises 0.4% to 1.0453
  • AUD/USD gains 0.4% to 0.7205, with MACD and slow stochastics suggesting shift in momentum after 3-week slide; Aussie bonds higher, in line with Treasuries
    • NAB notes that the last time the RBA’s cash rate sat below the Fed’s, AUD/USD fell to as low as 0.48; however, stronger terms of trade indicate any drop for Aussie will be limited to 0.65 unless there was a U.S.-instigated trade war
  • Oil retreats from 18-month high, while gold advances. Yield for 10-year Treasuries falls 2bps to 2.49% after slumping 5bps Wednesday

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 market.

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Forex

Naira Plunges Against British Pound to N600 on Black Market

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Naira Falls  by N20 Against British Pound to N600

Economic uncertainties amid low oil prices weighed on the Nigerian Naira against its global counterparts.

The Naira plunged against the British Pound by N20 from N580 it exchanged two weeks ago on the black market to N600 on Thursday and remained at the same rate on Friday morning.

The local currency has remained under pressure since Coronavirus disrupted global economics and demand for global oil earlier in the year. Nigeria, an oil-dependent economy, was one of the nations affected by the low oil prices and disruption of global supply chain and logistics.

This coupled with a series of local challenges like the rising cost of servicing debt to revenue, weak manufacturing sector that depends on importation for most of its raw materials, unclear economic direction that deterred foreign investors and eventually weighed on the nation’s foreign direct investment and capital importation hurt the nation’s economic outlook and investment sentiment.

Against the Euro common currency, the Naira declined by N35 to N545 on Thursday, down from N510 it traded about three weeks ago.

This decline continues against the United States dollar as the local currency traded at N474 to a US dollar, down from N465 it was exchanged three weeks ago.

The inability of the Central Bank of Nigeria to support the local currency through sufficient dollar liquidity continues to impact the manufacturing sector and other key sectors that depend on importation for operations.

Also, the scarcity dictates the Naira exchange rate to its counterparts, especially after a recent report showed foreign investors are looking to access the US dollar to repatriate their funds.

Other factors, like the recent Shoprite announcement that it was pulling out of Nigeria, Africa’s largest economy, due to falling revenue and challenging business environment compounded the nation’s woes.

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Naira Declines Slightly on the Black Market to N474/$

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Naira Drops Marginally on the Black Market to N474 Against US Dollar

Nigerian Naira declined marginally on Tuesday on the parallel market, popularly known as the black market.

The local currency declined by N1 to N474 per US dollar, down from the N473 it traded on Monday.

This was coming after Shoprite announced it would be exiting Nigeria, Africa’s largest economy. The announcement further damped the nation’s economic outlook amid the already heighten economic uncertainties.

Nigeria continues to struggle with low dollar availability after low oil prices and weak global demand for the commodity eroded the nation’s foreign revenue generation.

On the Investors and Exporters Forex window, the Naira remained pressured at N389 to a US dollar, better than the N389.25 it exchanged on Monday but more than the N381 stipulated by the Central Bank of Nigeria.

Total turnover traded by investors rose from $18.83 million traded on Monday to $24.66 million on Tuesday.

Experts have said the series of bad news emanating from the country will continue to deter potential investors and hurt capital importation necessary to boost dollar liquidity.

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Forex Scarcity Weighs on Manufacturing Sector

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Steel Manufacture At Evraz Plc West-Siberian Metallurgical Plant

Manufacturing Sector Suffers from Lack of Dollar Liquidity

The  Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, has said lack of dollar availability continues to weigh on the manufacturing sector in the first half of the year as the sector recorded its third consecutive month of contraction in the month of July.

According to Yusuf, several manufacturers had to source for forex on the black market, increasing scarcity on the already stressed section of the forex even more. This, other experts have blamed for the high Dollar-Naira exchange rate on the black market.

On Monday, the Naira was exchanged at N473 to a US dollar on the parallel market popularly known as the black market. The local currency gained N2 from the N475 it was exchanged before the Sallah holiday to N473 on Monday when the market opened.

“Across, practically, all sectors, we are experiencing cost escalation, loss of credit lines enjoyed from foreign creditors, forex remittance challenges and many more.  We need an urgent response from the CBN to calm the situation and restore confidence in our foreign exchange management framework,” Yusuf stated.

The Lagos Chamber of Commerce and Industry said most of its 2,000 members have been hit by the dollar shortage and wide foreign exchange rate that is presently eroding their profits.

“If the situation persists, it will lead to lay-offs. If you are not producing, there will be a shortage of goods in the market, prices will go up,” he added

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