- Dollar Strengthens for Second Day
- Treasury Yields Rise on Oil
The dollar advanced for a second day as traders increased bets the Federal Reserve will raise interest rates this year and as a jump in oil prices pushed up Treasury yields.
The U.S. currency strengthened against all except one of its 16 major counterparts as the probability the Fed will tighten this year climbed to 68 percent, the most since June. The greenback also rose as the second U.S. presidential debate Sunday added to speculation Democratic nominee Hillary Clinton will prevail over Republican Party candidate Donald Trump. New Zealand’s dollar dropped for a seventh day.
“The dollar has risen on the back an increase in pricing expectation of a December hike as the probability of a Clinton presidency has increased and more recently as oil prices have risen,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “The dollar got another leg higher following the move higher in U.S. Treasury yields at the Asia open.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.2 percent as of 11:41 a.m. in Tokyo after gaining 0.1 percent Monday. The dollar climbed 0.4 percent to 103.97 yen and appreciated 0.1 percent to $1.1126 per euro.
Saudi Arabia and Russia, the world’s two largest crude oil producers, said they’re ready to cooperate to limit output, helping send prices to a one-year high in London. Oil has surged about 15 percent in the past two weeks, and this will add to inflationary pressure in the first quarter of 2017, according to Macquarie Bank Ltd. Canada’s dollar was little changed at C$1.3186 to the U.S. currency after jumping 0.9 percent Monday. Crude is the nation’s second-largest export.
“Every central bank will be affected and will have to rewrite their forecasts and their guidance, but a stronger dollar will probably emerge from the ensuing volatility — except against the Canadian dollar — as U.S. Treasury yields keep rising,” Macquarie Bank analysts including Nizam Idris, head of foreign-exchange and fixed-income strategy, wrote in a note to clients. “A more-hawkish Fed should trump less-dovish central bankers elsewhere in terms of FX impact.”
New Zealand’s dollar fell 0.5 percent to 71.01 U.S. cents and the Aussie dropped 0.4 percent to 75.74 U.S. cents.
The U.S. economy probably isn’t at full employment and inflation remains below target, Federal Reserve Bank of Chicago President Charles Evans said as he argued for keeping interest rates low until core inflation moves higher.
Naira Declines to N465 Against US Dollar on Black Market
Naira Falls to N465 Against US Dollar on Black Market
Nigeria’s economic uncertainties continued to weigh on the Nigerian Naira despite the Central Bank of Nigeria’s forex sale resumption.
The local currency declined by N3 from N462 a US dollar to N465 on the black market even with over $58 million injected into the forex market through the bureau de change.
Against the British Pound, Naira depreciated by N5 from N595 to N600 on Friday while it dipped by N3 against the European common currency to N548, down from N545 it traded on Thursday.
A series of weak economic fundamentals and anti-people policy continued to hurt the nation’s economic outlook and investors’ confidence.
In a recent event, the Nigerian government simultaneously raised electricity tariffs, pump prices and foreign exchange rates in an economy that depends on imports for most of its supplies.
Also, with the unemployment rate at over 27 percent, inflation rate over 13 percent and the number of companies shutting downing operation rising on a daily bases, foreign investors and even local investors are now holding back on investments needed to support the nation’s weak foreign reserves and cushion the negative effect of COVID-19.
While the exchange rates have moderated slightly from COVID-19 peak, it remains close to COVID-19 record.
Zenith Bank Joins Other Banks to Cap International Spend Limit at $100/Month
Zenith Bank Caps International Spend Limit at $100 Per Month
Following persistent forex scarcity impacting the nation, Zenith Bank has joined other deposit money banks capping international spend limits.
In an e-mail to customers, the lender said “Please be informed that the monthly international spend limit for your Zenith Bank Naira Card has been reviewed to US$100 while the use of Zenith Bank Naira cards for international Automated Teller Machine cash withdrawals is still temporarily suspended.’
It added that this review is in response to change in Nigeria’s macroeconomic factors.
The bank, however, advised those with higher international spend requirements than the US$100 stipulated above to visit any Zenith branch and request a foreign currency debit or prepaid card “which are available in US Dollar, Pounds and Euro variants.”
This is coming a few weeks after UBA, GTBank, First Bank and others capped their international spend limits to $100 for similar reasons. However, Zenith’s decision was after the Central Bank of Nigeria commenced forex sale to the Bureau De Change Operators across the country.
Nigeria’s Foreign Exchange Inflows Decline by 43.2% in May
CBN Says Foreign Exchange Inflows Decline to $5.52bn in May
The total foreign exchange inflows into Nigeria in the month of May declined by 43.2 percent, according to the Central Bank of Nigeria’s report.
The report said the COVID-19 pandemic negatively impacted capital inflows during the month as the total foreign exchange inflows dropped to $5.52 billion.
It said “Inflows through the CBN and autonomous sources were negatively impacted.
“On a month-on-month basis, foreign exchange flows into the economy declined to $5.52bn in May 2020.
“The decline in inflow, relative to the level in April 2020, was attributed to the lower receipts from oil sources, which fell sharply by 55.2 per cent because of the continued fragility in global crude oil demand.
“Inflow through autonomous sources, particularly invisible purchases, declined by 7.0 per cent to $3.51bn, relative to the preceding month, while there was a 66.2 per cent fall in inflow through the CBN, which stood at $2.01bn in May 2020.”
However, foreign exchange outflows from the country declined by 23.9 percent to $2.50 billion in the month. Likely because of forex scarcity and the central bank forex rate adjustments that curbed outflows by foreign investors.
A break down of the report showed that outflow through the apex bank declined by 30.9 percent to $2.19 billion, below what was recorded in April.
But outflow through autonomous sources, mainly imports and Invisibles, rose by 152.2 percent to $0.32 billion. Higher than the amount reported for the month of April.
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