Naira Slides on FX Market Liquidity Squeeze, US Dollar Rally
Naira fell against the US dollar as rising demand for international payments outstripped FX supply in the currency market on Friday. The local unit closed at N1379 per greenback as eligible market participants’ dollar requests beat available liquidity for settlements.
The exchange rate fluctuated between N1375 and N1382 per dollar during the day as demand pressures mounted at the official window. The Nigerian foreign exchange market (NFEM) recorded a slowdown in interbank FX turnover and deal counts.
According to Central Bank data, interbank FX turnover fell to $71.044 million on Friday, down about 10% from $78.708 million the previous day. Also, interbank forex market deals reduced to 87 from 106 trades executed at the window on Thursday.
The total forex inflows into the Nigerian foreign exchange market have been fluctuating, with about $1 billion total inflow reported last week.
Total FX inflows settled at US$0.99 billion last week, according to the research subsidiary of Coronation Merchant Bank, with Foreign Portfolio Investors (FPIs) accounting for the largest share at 35.81%, or US$0.35 billion.
Exporters accounted for 28.72% or US$0.28 billion, while the CBN contributed 11.15% or US$0.11 billion. Non-Bank Corporations also made up a notable 10.92% of total inflows, reflecting continued support from both market-driven and official sources.
US Dollar Gains Momentum
The US Dollar Index (DXY) trades within a volatile range on Friday as a sparse US economic calendar leaves traders watching developments in the Middle East after renewed hostilities between the United States (US) and Iran this week.
Even so, the latest flare-up has provided only limited support, with the DXY set to finish the week virtually unchanged.
At the time of writing, dollar index, which tracks the Greenback’s value against a basket of six major currencies, is trading around 100.85 after slipping to a one-week low of 100.60 earlier in the Asian session.
On Friday, US President Donald Trump said in a Truth Social post that Iran had asked to continue talks and that the US had agreed, while reiterating that the ceasefire was “over.”
The mix of diplomacy and ongoing tensions has kept traders cautious about a quick end to the war. Meanwhile, hawkish Federal Reserve (Fed) expectations have kept US Dollar (USD) bears on the sidelines. #Naira Slides on FX Market Liquidity Squeeze, US Dollar Rally#
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