The naira showed mild strength against the haven currency in the last trading session of the week in the official foreign exchange market.
Data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) indicated that the local currency traded at N1,600 to the dollar on Friday, strengthening from Thursday’s N1,601.20/$1 in the official window.
CBN Chief, Olayemi Cardoso disclosed that trust in the naira is “gradually returning,” and the apex bank is focused on maintaining stability.
He stated that confidence in the naira stems from the conventional policies implemented, which would instill confidence in the currency.
Furthermore, the Central Bank of Nigeria has denied rumors that the former N200, N500, and N1,000 banknotes will no longer be legal tender as of December 31, 2024.
Afam Ogene, a member of the House of Representatives and the Labour Party Caucus Leader, questioned the Central Bank of Nigeria (CBN) regarding its ambiguity about whether old and new naira notes still hold market value. The issue of naira currency has caused upheaval among Nigerians since the CBN issued new notes, leaving many in a state of bewilderment. The House of Representatives has ordered its Committee on Banking Regulations to liaise with the CBN and provide a report within 21 days.
“Which country in the world runs its economy with two different sets of identical currency notes?” Ogene asked, casting doubt on the CBN’s motivations. He emphasized that while the new notes were originally intended to replace the old ones, their coexistence has created challenges for Nigerians.
U.S. Dollar Maintains Strength in Global Market
The haven currency posted its fourth consecutive week of gains following reports this week that included expectations for the Federal Reserve’s interest rate. However, the dollar fell for a second straight session as a recent surge lost momentum.
- The dollar index consolidated, settling at 104.03 index points. Market indicators showed that the DXY index broke through the 200-day SMA this week, but overextension compelled a pullback. It is now anticipated that the index will consolidate, reversing overbought conditions.
- After an unrevised 0.3% gain in August, non-defense capital goods orders excluding aircraft—a highly watched indicator of business spending plans—increased by 0.5% last month, according to the Commerce Department. This was higher than the 0.1% increase predicted by Reuters-polled economists.
- The University of Michigan survey revealed that October’s consumer sentiment increased from 70.1 to 70.5, exceeding the 69.0 expectation. Meanwhile, the one-year inflation outlook dropped from 2.9% to 2.7%, consistent with September’s final figure.
A string of encouraging economic data has reduced expectations regarding the magnitude and pace of the Fed’s rate cuts and raised U.S. Treasury yields. The dollar is set to record its fourth consecutive week of gains, with next week’s important government payrolls report now at the center of investors’ attention.
- Additionally, the dollar has benefited from increased market anticipation that Republican nominee and former U.S. President Donald Trump will win next month, which could likely result in inflationary policies.
- Fed officials made few announcements during IMF week in Washington, suggesting that they, like the market, are awaiting labor and inflation statistics to decide whether to make one or two cuts before the year ends.
- Trump is gaining ground in the markets and betting odds, but polls indicate that the race is too close to call.
This may be due to the experiences of the last two elections when polls underestimated Trump, along with the growing demand for hedging against a Trump presidency, which is viewed as a significant macro/market event due to potential threats to Fed independence, tax cuts, protectionism, and strict immigration laws