Naira Gains as Seasonal FX Demand Pressures Ease
The Nigerian naira rallied on Monday amidst an intermittent slowdown in foreign currency demand pressures across the market. There is a signal that seasonal demand is slowing down, analysts told MarketForces Africa as the volume of transactions consummated at the Investors and Exporters FX window improved.
FDMQ over-the-counter (OTC) FX data showed that the local currency appreciated by 2.43% against the dominant currency – the US Dollar – in the Investors and Exporter Window, closing at a rate of N756.94.
On Friday, traders said the exchange rate settled at N775.76 per United States dollar. On weekly comparison, the local currency actually appreciated 26bps before it closed at N775.76 at the official window.
Across the FX market last week, Naira traded within a similar band to the previous week. At the Investors & Exporters Window, activity level improved by 8.3% to $421.6 million last week, leading to a 0.3% appreciation of the price currency by 0.3%.
Trades were consummated at the official market for investors and exporters within the N650.00 – N869.00 per US dollar. In its market update, Afrinvest noted that the spread between both FX rates continued to thin though the spread of the weekly average rose by 60.6% to ₦89.02.
In the parallel market, the Naira lost 0.35% against the US dollar, reaching N870 as foreign reserves continue to decline amidst low accretion from crude oil exports. Data from the CBN showed that Nigeria’s FX reserve declined by US$19.20 million to US$33.95 billion.
Meanwhile, Brent crude rose 0.67% to $84.98 per barrel, while WTI crude gained 0.99% to $81.38 per barrel. Oil futures were higher on Monday as supply constraints outweighed expectations for lower energy demand
Elsewhere, the central parity rate of the Chinese currency renminbi, or the yuan, strengthened 33 pips to 7.1305 against the dollar on Monday, according to the China Foreign Exchange Trade System.
In China’s spot foreign exchange market, the yuan is allowed to rise or fall by two per cent from the central parity rate each trading day.
The central parity rate of the yuan against the dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
Analysts at Cordros Capital Limited said they expect the currency pressures to remain intact in the near term, given seasonal-induced demand and still frail FX supply despite the CBN’s abolishment of its multiple FX windows. #Naira Gains as Seasonal FX Demand Pressures Ease#
