Naira Trades Sideways Against USD as FX Pressure Tempers
The naira traded sideways at the Nigerian foreign exchange market (NFEM) on Monday amid low FX buying and selling activity in official transactions.
Both pairs -the naira and the US dollar- maintained their relative strength as the energy crisis raised global inflation risks and amid the US Fed’s hawkish stance, which affected African currencies.
The market is seeing FX trading that continues to swing both sides in the absence of directional bets by eligible actors at the official window.
The local unit closed at N1379.6504 per US dollar at the official window, from the opening quoted rate of N1379.6201 at the beginning of the trading session.
The spot rate was relatively stable in the absence of demand pressures from international payment requisitions against the available FX supply.
Demand and supply for the pairs recorded low buying and selling activity in the official window on Monday, keeping spot FX rates relatively stable at N1379 per greenback.
Transactions were consummated at N1378-N1381 per dollar traded, amid a soft increase in interbank FX turnover. According to Central Bank FX data, interbank FX turnover surged by 21.14% to $86.136 million from $71.044 million at the previous trading session on Friday.
Interbank deal counts, however, declined to 85 from 87 on Monday, reflecting the absence of pressure from US dollar payments against local units. Last week, total foreign exchange inflows amounted to US$0.97 billion, according to a Coronation Merchant Bank research report.
Analysts reported that foreign portfolio investors (FPIs) remained the largest source of inflows, contributing 30.29% or US$0.29 billion, closely followed by Exporters and Importers at 30.14%,
Non-bank corporates accounted for 26.49% or US$0.26 billion, while the Central Bank of Nigeria (CBN) contributed 6.93% or US$0.07 billion. Other sources made up the remaining 5.40% of total inflows.
“…We expect the naira to trade within a relatively stable range, supported by sustained foreign exchange inflows and the CBN’s continued market interventions, although persistent underlying FX demand is likely to keep depreciation pressures elevated, the report said.
The renewed global energy crisis has strengthened the US dollar index, while the Euro, sterling and Japanese yen have weakened. As oil prices climb due to the escalating situation, market participants are pricing in a more aggressive monetary policy to curb potential inflation.
The yield on the 2-year U.S. Treasury note, which is highly sensitive to rate expectations, has climbed to a more than one-year high.
Swap trading data now indicates that the market has almost fully priced in a rate hike in September, a sharp increase from the 66% probability assigned just one week ago. #Naira Trades Sideways Against USD as FX Pressure Tempers#
Naira Slides Amid Bullish Economic Growth Estimates, Robust FX Reserves
