Naira Holds Strong Against US Dollar, Gains 0.06%
Naira appreciates by 0.06 per cent to N414.80 on Monday at the Investors and Exporters foreign exchange window after the local currency closed at ₦415.05 on Friday.
Trading data show that the local currency appears to have found a position around N414.80 where it had stayed for a while when naira records moderate gains in the FX market. Read: Naira Depreciates to N414.80 at Official FX Window
In the foreign exchange market space for investors and exporters at the weekend, most participants maintained bids between ₦405.00 and ₦444.00 per dollar, according to FSDH Capital.
Similarly, Nigeria’s gross external reserve remained under moderate pressure, declining by $181.19 million to $40.71 billion as the Central Bank (CBN) continued to support the naira at the official channels.
On Friday, currencies traders hinted that Naira appreciated by 0.3% to N572.00 at the parallel market.
But the total volume of foreign currencies transacted (turnover) at the investors’ window declined by 11.7% from the beginning of the week to $1.01 billion, according to Cordros Capital analysts note.
In the forwards market, analysts said the naira was unchanged at N415.69 to a dollar for the 1-month contract but appreciated 0.2% to N420.55 for the 3-month, and N429.51 for a 6-month contract while 1-year contracts rose 0.1% to N447.37/$.
Expressing an opinion on the FX rate, Cordros Capital analysts said the CBN has enough supply to support the FX market over the short term, given inflows from the recently issued Eurobond and the IMF’s SDR.
However, analysts insist that foreign inflows are paramount for sustained FX liquidity over the medium term, in line with our expectation that accretion to the reserves will be weak given that crude oil production levels remain quite low.
Analysts said in the market report that foreign portfolios investments (FPIs) that have historically supported supply levels in the IEW will be needed to sustain FX liquidity levels.
In 2019, before the outbreak of the pandemic, FPIs accounted for 53.8% of FX inflows to the Investors and Exporters FX window, according to analysts note.
Cordros Capital maintains the expectation of further adjustments in the exchange rate peg closer to its fair value, saying that flexibility in the exchange rate would be significant in attracting foreign inflows back to the market. #Naira Holds Strong Against US Dollar, Gains 0.06%
