The naira traded within a tight range on Thursday following the recently concluded Monetary Policy Committee (MPC) meeting while minutes of the Federal Reserve’s boosted the haven currency credentials amid growing concerns over higher-for-longer interest rates.
The local currency closed flat versus the greenback on Wednesday in the official foreign exchange (FX) market, a day after the CBN raised its benchmark interest rate by 150 basis points to 26.25%.
According to data from the FMDQ Securities Exchange Limited, the dollar was quoted at N1,462.59 on Wednesday, slightly strengthening the value of the naira by 0.21% compared to Tuesday’s quote of N1,465.68 at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
However, the naira weakened slightly against the dollar on Wednesday, losing about 1% on the black market. The naira was quoted at N1,475 per dollar on Wednesday evening.
Following a two-day meeting of the Monetary Policy Committee (MPC) on Tuesday, Nigeria’s apex bank maintained the asymmetric corridor around the monetary policy rate (MPR) at +100/-300, the commercial banks’ cash reserve ratio (CRR) at 45.00%, and the liquidity ratio at 30.00%.
Consequently, the CBN directed all Bureaux De Change Operators to reapply for licenses, primarily to strengthen the integrity of the nation’s foreign exchange market,
The apex bank revealed this on Wednesday in a statement approved by Haruna Mustapha, Director of Financial Policy and Regulations.
In a recent directive to BDC operators, the CBN stated, “All Existing BDCs shall re-apply for a new license according to any tiers or license category of their choice as provided in the guidelines.”
Data from the FMDQ revealed that the intraday high closed at N1,531 per dollar on Wednesday, stronger than the N1,549/$1 finish on Tuesday, indicating that market fundamentals still reflect substantial intraday volatility.
The greenback remains elevated as Fed minutes heighten concerns about interest rates
The dollar index and dollar index futures both steadied in the London trading session following significant overnight advances. The dollar increased and reached a one-week high in trade,
The Fed meeting minutes in late April revealed that some Fed officials were prepared to hike interest rates further to reduce inflation, and policymakers were becoming increasingly concerned about sticky inflation.
A series of separate speeches from Fed officials suggesting sticky inflation would probably postpone any possible rate decreases came before the minutes.
Even if it is still thought that the Fed won’t raise interest rates much more, markets are now pricing in a higher likelihood that the central bank will maintain high rates for an extended time, which is bad news for risk-averse Asian markets.