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Rand’s Slide Is Tempered by Yield Chasers Unfazed by Zuma’s Win

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New Rand Banknotes
  • Rand’s Slide Is Tempered by Yield Chasers Unfazed by Zuma’s Win

South Africa’s President Jacob Zuma is staying put — but the rand’s muted reaction suggests investors are still finding the country’s yields tempting enough to look past the damage he can do to the nation’s economy.

Zuma survived a bid by some party leaders to remove him from office, putting an end to optimism that helped boost the rand last week by the most since March. While the currency gave up some of those gains on Monday, the one-month forward implied yield — the predicted return based on current yields — was near the highest since January.

The flow of money into high-yielding emerging markets is aiding the rand even as political risks stack up, according to Barclays Plc. Investors poured a net 5.3 billion rand ($409 million) into South African government bonds last week as they chase some of the highest yields in emerging markets.

“There’s a wall of money out there that continues to be flooding into emerging-market assets, looking for carry in a low-volatility environment,” Mitul Kotecha, the head of Asia currency and rates strategy at Barclays in Singapore, said in an interview with Bloomberg TV. Flows into emerging-market assets persist “despite this sort of news that you’d think would have the opposite impact on the currency,” he said, referring to Zuma’s win.

The president was under pressure to quit following his decision on March 31 to fire Pravin Gordhan as finance minister in a cabinet reshuffle, a move that sparked public protests and cost the country its investment-grade credit rating.

The rand fell 0.4 percent to 12.9269 per dollar as of 12:12 p.m. in Johannesburg, reversing gains of as much as 1.7 percent. That trims the currency’s advance this month to 3.4 percent, which is among the highest in emerging markets. The rand’s one-month forward implied yield climbed to 7.88 percent on Friday, the highest level since January. It slipped three basis points on Monday.

Meanwhile, the yield on the government’s rand bonds due 2026 climbed seven basis points to 8.57 percent, paring its decline in May to 13 basis points. The FTSE/JSE Africa All Share Index fell 0.2 percent, extending its losing streak to a fourth day.

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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Naira Slides to N475 Against US Dollar on Black Market

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Naira Trades at N475 Against US Dollar

Persistent dollar scarcity continues to hurt the value of the Nigerian Naira against its global counterparts across the nation’s forex segments.

The local currency declined to N475 to a US dollar on the parallel market, known as the black market. This represents a N1 decline from the N474 it traded on Thursday.

Against the British Pound, the Naira remained at N600. The same rate it exchanged on Friday. The local currency has lost N20 against the British Pound in the last three weeks amid rising unclear economic path.

The Naira declined by N5 against the Euro common currency to N550, down from N545 it sold on Thursday.

On the Investors and Exporters Forex Window, the local currency improved with the surge in turnover. Naira gained about N3 from N389 it exchanged against the US dollar on the I&E fx window last week to N386 on Friday.

Investors traded $92.22 million on Friday, up from the $18.83 million exchanged on Monday August 3, 2020.

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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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