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Yen: Ahead of BOJ April 27-28 Policy meeting

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Haruhikp Kuroda

The Bank of Japan is expected to announce its monetary policy and economic outlook report on Thursday in an effort to ease economic gridlock going forward.

While the current negative rate on reserves has cut deep into profits of financial institutions with idle money, the apex bank may consider helping these intuitions lend by offering a negative rate on loans, according to a Bloomberg report.

The officials familiar with the talks said this could have a positive impact on the economy, since commercial lenders are complaining of poor borrower’s interest, but also could raise questions about the apex bank giving subsidies to commercial lenders.

Another possible surprise from Governor Haruhiko Kuroda is additional stimulus, after Japan’s Prime Minister Shinzo Abe said on Sunday he will create an extra-budget to address the economic damage caused by Kumamoto earthquakes that killed 48 people and destroyed 1527 houses, there is a possibility of additional stimulus from the BOJ, especially knowing consumer spending will drop due to self-restrain mood of the Japanese people following the disaster.

Again, BOJ has been looking to weaken the yen to boost exports and stimulate manufacturing sector. Even Taro Aso, Japan’s Finance Minister said “that rapid fluctuations, whether strengthening or weakening, are undesirable. Recent movements have been one-sided and action will be taken as needed.” With a possible drop in consumer spending following the disaster, this may be the right time for BOJ to add stimulus and end the yen current strength.

“The BOJ will aim to shock and awe the markets in order to push the yen weaker again,” said Mansoor Mohi-uddin, a Singapore based strategist at Royal Bank of Scotland Group Plc.

Mohi-uddin further said the central bank will increase its annual stimulus program to 100 trillion yen from 80 trillion yen, cut the deposit rate from -0.1 percent to lower debt on yields and boost purchases of exchange traded funds. This he said should send the yen to 115 a dollar by the end of June.

Currently, options traders are paying a premium of 1.4 percent points for one-week contracts to buy the dollar against the yen as speculation builds that officials will act.

 

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 markets.

Forex

Naira to a Dollar Exchange Rate Dips to N462 at Black Market Amid Social Unrest

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Youth Protests Weigh on Naira to a Dollar Exchange Rate on Black Market

The ongoing youth protest in Nigeria continues to weigh on the economic outlook and investors’ sentiment across the board.

The Nigerian Naira to a US dollar exchange rate declined by N1 from N461 on Tuesday to N462 on Wednesday and in the early hours of Thursday at the black market.

Against the British Pounds, the Naira exchanged at N600, down from the N592 it traded on Tuesday. This decline continues against Europe’s common currency as the Naira dipped against the Euro by N2 from N538 to N540 on the black market.

The nationwide protest by the Nigerian youth to curb police brutality and harassment on daily basis continues to disrupt business activities in Africa’s largest economy.

Nigerian youths are saying enough is enough after the death of several youths by the law enforcement agency, Special Anti-Robbery Squad (SARS), that was constituted to curb robbery but gone rogue and made extortions, harassments and in some cases killing of innocent citizens their means of livelihood.

Despite the government disbanding the unit and promise to redeploy officers to other existing units, commands and formations, the youths are saying they want a total discharge of corrupt officers and the entire reform of the Nigerian Police Force (NPF) before they will even consider backing down on the ongoing protest, especially after politicians started sponsoring thugs to attack peaceful protesters in Lagos and Abuja.

The Nigerian Stock Exchange closed flat on Wednesday amid rising uncertainty surrounding the government’s ability to de-escalate the situation given the fact that the youths no longer trust the administration or Nigerian government.

The Naira remained weak against global counterparts and expected to plunge further once the National Bureau of Statistics (NBS) release third-quarter Gross Domestic Product (GDP) report expected by many experts to plunge the nation into its second recession in four years.

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Naira Declines on the Black Market on Tuesday

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Naira Plunges Against Global Counterparts on Tuesday on the Black Market

The Nigerian Naira declined on Tuesday on the black market despite efforts by the Central Bank of Nigeria to prop up the value of the local currency against global counterparts.

The Naira declined by N4 from N457 per US dollar it traded on Friday to N461 on Tuesday morning. Against the European common currency, the Naira fell by N1 to N538 from N537.

However, the local currency improved by N3 against the British pound from N595 it exchanged on Friday to N592 on Tuesday.

Nigeria’s weak economic outlook continues to weigh on the Naira outlook, especially with the economy projected to enter recession in the third quarter.

Despite efforts to cushion the negative effect of COVID-19 on the nation’s economy, unclear policy path amid weak business sentiment and low foreign revenue generation needed to sustain economic productivity in a majorly import-dependent economy drag on Nigerian Naira value and the entire economic outlook.

 

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Dollar to a Naira Exchange Rate Remains Unchanged on Black Market

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Dollar to a Naira Exchange Rate Flat on Black Market on Monday Morning

The US Dollar to a Naira exchange rate remained flat on the black market on Monday morning as businesses and investors’ sentiment surged with an improved economic outlook.

The Dollar to a Naira exchange rate stood at N457 on the black market on Monday morning while the British Pound rate to a Naira was N595, better than the N597 it exchanged on Wednesday.

The Euro to a Naira rate stood at N537 on Monday, a N3 improvement from N540 it sold on Wednesday.

The Naira remained under pressure despite the recent improvement in value following the Central Bank of Nigeria’s decision to lowered the interest rate by 100 basis points to 11.5 percent.

Economic uncertainties as the nation prepared for a second recession in four years weighed on foreign direct investment and continues to drag on growth, especially after the World Bank predicted that the nation’s growth would contract by as much as 4.1 percent in 2020 and only rebound by 0.3 percent in 2021 due to its overexposed to the global oil market.

However, the multilateral financial institution supported President Muhammadu Buhari’s decision to remove oil subsidy and adjust the nation’s electricity tariff to reflect the actual consumption.

Still, it is uncertain if the recent measures by the Federal Government and the Central Bank of Nigeria would be enough to stimulate growth in the real sector of the economy and prop up the Dollar to a Naira exchange rate given the global health crisis.

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