The naira maintained its strong foot in the black market while the dollar eased further as traders bet that the Federal Reserve was done with its interest rate hikes, although anticipation of key nonfarm payroll data kept the naira bulls’ gain in check.
After a swift recovery and erosion of the crucial resistance level of N1,000/dollar late Thursday, currency traders on Binance’s P2P market last traded the naira as high as N972/$.
A Chainalysis research report stated that Nigeria had the largest peer-to-peer exchange volume in the cryptocurrency market.
Nigeria moved up one spot to 17th in P2P exchange volume in 2022 from its 18th place ranking in 2021.
At the official market, the naira, however, reached an intraday low of N1,018.6 to the US dollar on Thursday, November 2, at the official NAFEM window.
The release of important nonfarm payroll data for October later on Friday, however, presented the naira with an uphill task battle against the greenback.
Resilience in the labour market gives the Fed more reason to raise interest rates, which could undo some of this week’s dollar weakness.
The Federal Reserve is still willing to raise interest rates this year, though the final decision will primarily be based on additional economic data.
Price action makes clear that there seems to be tension in the US Dollar Index’s rally.
Given that the DXY Index hit a multi-month high last month, market diversity appears to be low as determined by fractal dimensions.
The US dollar index, which compares the US dollar to six rival currencies, was at 105.9 index points on Thursday, not too far from its one-week low of 105.8 points. The index is expected to decline by 0.4% this week, which would be its third weekly decline since July.
The CME FedWatch tool indicates that following the U.S Fed pause on interest rates, the market is now pricing in a less than 20% chance of a December rate hike, down from 39% a month earlier.
Nonetheless, the Fed did not rule out additional rate hikes, which is a testament to the strength of the world’s largest economy.
Consequently, The CBN started to clear the backlog of FX forward contracts, which was anticipated to boost the naira, the business community, and Africa’s largest economy as a whole.
It is known that although the source of funds used to resolve the backlog remains a mystery, foreign airlines are also said to be beneficiaries.
Nigeria’s central bank focused on Tier 2 Nigerian banks and international banks with over 75 to 80% of the foreign exchange forward contracts obligations cleared.
Findings show that Citigroup ($72 million), Stanbic ($125 million), and Standard Chartered ($63 million) are among the companies that are receiving FX futures deliveries this week
The FG also stated that it expected to spend $10 billion to settle FX obligations, support the country’s FX market and stabilize the naira.
Wale Edun, the Minister of Finance stated that FX liquidity will improve in the coming weeks. He further highlighted that discussions with sovereign wealth funds willing to invest and provide advances along with investments are in advance phases.
[Nairametrics]