The naira moderated by 71 basis points in the official market amid increased pressure from the U.S. dollar index, showing improved stability in the unofficial market.
FMDQ data highlighted that the naira dipped by 0.71% against the greenback, settling at N1,500.79, much lower than N1,490.2/$ on Monday at the Nigerian Autonomous Foreign Exchange Market.
Currency exchangers attributed the recent uptick in dollar demand to summer vacations and importers who require the haven currency for purchasing raw materials.
Market fundamentals support the naira’s remarkable stability due to the fresh foreign cash inflows that have entered the Nigerian economy during the recent decline in the currency’s value.
The World Bank and Afreximbank contributed about $6 billion to the Nigerian economy, bolstering the country’s foreign exchange reserves and maintaining the value of the naira.
The CBN’s chief, Olayemi Cardoso, recently expressed hope for the future of the volatile era in the foreign exchange market, given the current calm in the market.
This month, the naira has been relatively stable, trading in the official market within a narrow range between N1,473 and N1,500/$.
“I think that in terms of volatility, we have seen the worst. We are pleased that willing sellers and willing purchasers can now transact business in the market,” he stated.
Cardoso also mentioned, “We’ve seen a lot of stability within the market; there’s hardly been any movement in the currency in the past two or three weeks after a period of volatility.”
The U.S dollar index maintains an upward trend
Tuesday saw a rise in the value of the US dollar due to hawkish remarks made by Federal Reserve officials and statistics indicating a steady housing market in the largest economy in the world.
These signals suggest that the central bank will not hastily initiate its rate-cutting cycle.
Setting the ball in motion for the dollar was Fed Governor Michelle Bowman, who reiterated on Tuesday that she believes the policy rate at its current level “for some time” will probably be sufficient to contain inflation. She also reaffirmed that, if necessary, she would increase borrowing charges.
“They sound very non-committal and also very data-dependent, given the uncertainty around the inflation outlook that is higher in the U.S. than elsewhere.”
Yesterday’s mixed U.S. data didn’t stop the dollar from strengthening. According to a survey, single-family home prices in the United States rose steadily in April, increasing by 0.2% from the previous month when they were flat. After rising 6.7% in March, house prices gained 6.3% in the year ending in April. The dollar rose slightly because of that.
However, the Conference Board reports U.S. consumer confidence declined somewhat in June, with the measure at 100.4 from a downwardly revised 101.3 in May. However, the June figure was just slightly higher than the 100-market estimate.
Investors anticipate the release of the Fed’s favorite inflation indicator, the U.S. personal consumption expenditures (PCE) price index, on Friday
The euro fell by 20 basis points against the dollar to settle at $1.0714. The European currency has been under strain partly because of the political unrest in France following President Emmanuel Macron’s unexpected announcement of early elections earlier this month.
With the French elections starting this weekend and the first U.S. presidential debate between President Joe Biden and his predecessor, Donald Trump, scheduled for this Thursday, politics was also on currency traders’ minds.