Naira Rebounds, Market Anticipates FX Outflow
The Nigerian naira rebounds against the United States (US) dollar domination in the foreign exchange (FX) markets amidst scarce inflows from foreign investors.
The recent US Federal Reserve additional 25 basis points interest rate hike is expected to hit foreign currencies movement in and out of Nigeria and other African countries.
This expectation, according to FX analysts, is supported by a similar key rate hike booked by European Central Bank (ECB) to curb the inflation rate from making further uptrend.
Given the level of adjustment in key policy rates, analysts estimated that inflation fighting in the United States, and the EU has slowdown. The move is to curb further crisis after interest rates hike triggered an unintended consequence in the US banking sector.
At the investors’ and exporters’ foreign exchange window, the local currency gained N0.22 to close at ₦462.88 per US dollar. In the parallel market, players priced the rate at N740, a rebound from N745 on account of the slowdown in foreign currency demand.
Data from the Central Bank of Nigeria (CBN) show that External reserves added $0.03 billion to close at $35.25 billion despite a decline in global prices of oil prices.
The crude oil prices fell further by about 8% after the Fed rate hike while Brent and Bonny’s light closed at $72.3 and $71.4 per barrel, according to trading data.
MarketForces Africa gathered that the outlook for the Nigerian naira is bleak as foreign investors’ participation in the local economy remains unimpressive.
There is an expectation that US Fed rate hikes that crossed 5% – 5,25% since September 2007 would trigger a flight to safety given that Nigeria’s inflation rate has shadowed return on naira assets. # Naira Rebounds, Market Anticipates FX Outflow
