The dollar held to a 10-month high against a basket of major currencies (Euro, British pound, Japanese Yen, Swedish Krona, Swiss Franc, Canadian dollar) on Thursday, while the naira held to an all-time low on the black market as investors weighed upbeat economic data from the United States and new comments from Federal Reserve officials.
Nigeria’s naira fell to an all-time low on the black market in the early hours of Thursday, trading above 1,000 naira/$, largely due to speculative demand as individuals turned to the dollar for storage store value.
The naira has weakened on the black market as speculative activities and excess demand have been shifted to the informal market, widening the gap with the official market, where currency exchange restrictions were lifted in June.
Forex traders in Nigeria’s parallel market say the central bank has failed to intervene in recent weeks, leaving businesses and individuals to seek supplies on the black market. Nigeria remains chronically short of foreign currency.
Finance Minister Wale Edun said last week that the currency’s weakness was due to the central bank owing about $6.8 billion in the foreign exchange market. Mr. Yemi Cardoso, the new CBN chief, recently stated that his immediate priority is to clear this backlog.
Government officials said they are working to attract liquidity from foreign investors, who continue to be hesitant to invest in Nigeria. The oil-for-dollar loan program that would have allowed the state oil company to receive $3 billion from the African Export-Import Bank (Afrexim) for a liquidity injection has yet to materialize.
Consequently, the US dollar index, which measures the greenback against a basket of other major currencies, was last at 106.70, hovering near an overnight high of 106.84, its highest point since November 30.
While the dollar remained strong, the euro and sterling struggled to recover from new multi-month lows reached on Wednesday.
Hawkish comments from Fed officials cited another interest rate hike, about $134 billion in new government debt sales this week, and the risk of a U.S. government shutdown as too high for investors. stock.
The move of global stock indexes beyond key technical support during a seasonally weaker period of the year points to further declines. New home sales in the United States were hit hardest by rapidly rising rates and saw their biggest decline in 11 months.
Minneapolis Federal Reserve Bank President Neel Kashkari was among the Fed spokesmen warning markets about the possibility of further interest rate hikes, saying on Wednesday that there was more evidence of current economic strength. which means further tightening could be considered.
Fed Chairman Jerome Powell is expected to speak later today, providing markets with further insight into the future direction of US monetary policy. Australian retail sales data, due out later today, will also be examined.
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