Parallel Market Rate Breaks Resistance as USD Exchange for ₦480

Parallel Market Rate Breaks Resistance as USD Exchange for ₦480

Naira depreciates further in the foreign exchange market Tuesday traded at ₦480 to a dollar as against resistance point of ₦475 previously sustained.

Analysts said they are unclear if the renewed pressure in the parallel market is linked to speculative positioning ahead of the resumption of international travels on August 29.

Meanwhile, the pressure at the foreign exchange market was attributed to a recent report by Reuters which indicated that Nigeria is yet to implement reforms required to access the US$1.5 billion budget support facility from the World Bank.

In the investors and exporters window (IEW), the local currency depreciated against the United States dollar by 0.05% or 20 kobo to ₦385.98.Parallel Market Rate Breaks Resistance as USD Exchange for ₦480

The official and secondary market intervention sales (SMIS) pegs were unchanged at 381 and 380.69 respectively.

In a related development, funding pressures persisted Tuesday, as financial system liquidity opened lower at ₦61 billion from ₦89 billion in the previous session.

As such, interbank funding rates remained in double-digits, although the Open Buy Back (OBB) and Overnight (OVN) rates eased by 115 bps and 150 bps to 15.25% and 16.00%, respectively.

Chapel Hill Denham said it expects funding pressures to ease towards the end of the week, due to scheduled OMO maturities worth ₦181.4 billion on Thursday.

Also, analysts said the fixed income market largely traded on a flat note, as investors remained cautious ahead of the bond primary market auction holding tomorrow.

In the NTB segment, discount rates on benchmark bills declined by a marginal 1bp to 1.61%, due to interests in mid-DTMs against flattish short- and long-day to maturities..

Chapel Hill stated that there some interests in few OMO bills, hence the benchmark curve compressed by an average of 5bps to 3.80%.

On the flip side, the bond market closed flat, as yields barely changed across tenors, with the average yield on the benchmark curve unchanged at 7.68%.

The monthly FGN bond auction is scheduled to hold tomorrow, with the DMO scheduled to offer ₦150bn: ₦25bn of JAN 2026, ₦40bn of MAR 2035, ₦45bn of JUL 2045, and ₦40bn of MAR 2050.

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Analysts stated that the last auction cleared at 6.0%, 9.5%, 9.8% and 9.95% respectively.

“We expect a well-bid primary market auction (PMA), but the scope for further moderation in yields is more limited, as investors begin to position portfolios for the regime change in the OMO market from October 2020”, Chapel Hill Denham stated.

Parallel Market Rate Breaks Resistance as USD Exchange for ₦480

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