CBN Smoothens FX Fluctuations, Sells $50m to Banks
The Central Bank of Nigeria (CBN) injected $50 million into the foreign exchange (FX) market to boost US dollar liquidity at the official window. The market experienced an increase in dollar demand all through the trading week at the Nigerian foreign exchange market.
The development caused the CBN to act, selling $50 million to authorized dealer banks to smoothen out the intermittent volatility. Hence, the local currency closed the week at N1535.03 per greenback, depreciating by N2.52 kobo week on week from N1532.51 at the beginning of the week.
FX volatility pressure was stemmed by the CBNβs intervention and increased inflows from foreign portfolio investorsβ inflows following the OMO auction. Boosting traders’ confidence, Nigeriaβs gross external reserves increased to the highest level since Dec 2021, growing by USD353.47 million week on week to USD41.08 billion.
Development in the forward market signifies pressures have persisted and the market anticipates the local currency may depreciate. Forward fx rates depreciated across contracts last week, according to Cordros Capital Limited.
The naira rates depreciated by -2 bps to N1,577.40 per dollar hedged across the 1-month contract. Also, the 3-month FX forward rate fell by -0.1% to N1,653.75/USD; the 6-month declined by -1 bp to N1,763.94; and the 1-year dropped by -1 bp to N1,975.62.
Most of the analysts sampled by MarketForces Africa maintained that the naira will remain stable, underpinned by robust FX liquidity and an efficient FX market. βWe expect sustained inflows from foreign portfolio investors (FPIs) due to existing carry trade opportunities and stronger market confidence.
βAdditionally, improving non-oil exports, as well as limited incentives for naira speculation, are expected to reinforce steady inflows from domestic sources,β Cordros Capital Limited said. #CBN Smoothens FX Fluctuations, Sells $50m to Banks#
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