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Currencies
U.S dollar drops, Currency traders fear increasing COVID-19 caseloads
The U.S. Dollar Index, which monitors the greenback’s strength against a basket of major currencies dropped 0.14% to trade at 92.263 points.
The U.S dollar suffered significant losses at the first trading session of the week. Currency traders are having their hopes dashed as a result of the increasing COVID-19 caseloads going out of control specifically in emerged markets amid promising potential COVID-19 vaccines already in the pipeline.
- At the time of writing this report, the U.S. Dollar Index, which monitors the greenback’s strength against a basket of major currencies dropped 0.14% to trade at 92.263 points.
READ: U.S dollar drops lower, as U.S Federal Reserve plans on boosting inflation
What this means
Currency traders seem to be highly concerned about reports that millions of Americans are anticipated to flout warnings to stay indoors amid the upcoming Thanksgiving holiday, raising fears such significant movement of humans could trigger the number of COVID-19 cases that are already going out of control.
In addition, Western Europe does not look immune too, taking into consideration that Europe’s largest economy Germany, could see its current restrictions on human mobility extended until mid-December.
READ: Afreximbank posts $217m net income in 9M 2020
What you should know
The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound Sterling, Swedish Krona, Euro, etc. Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries in Europe or Japan, would need to pay more dollars in fulfilling such payment obligations.
READ: Billionaires that can triple the value of Bitcoin
What they are saying
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave key insights into the macro that is playing out at the currency market.
“With just over a month to go until Christmas now, attention will remain on the Covid-19 pandemic as governments worldwide continue to impose tough restrictions on their citizens to contain the spread of the virus.
READ: Trump International Hotel sale stalled
“Economic data will likely get worse before it gets better. The impact of continued lockdowns will be felt for some time before vaccines become widely available.”
Bottom Line
The currency market is having a tug of war right now establishing whether it can look through nearer-term negative data and news.
Currencies
Naira gains marginally at NAFEX window, exchange rate to remain stable
The exchange rate between the naira and the dollar appreciated closing at N394/$1 at the NAFEX window.
On January 21, 2021, the exchange rate between the naira and the dollar appreciated closing at N394/$1 at the NAFEX (I&E Window) where forex is traded officially.
However, during intraday trading, the exchange rate traded for as high as N415.76/$1, sustaining yesterday’s figure which is the highest intraday trading tracked by Nairametrics. Forex turnover, however, dropped by about 14% as pressure on the foreign exchange market continues.
READ: Naira stabilizes at black market as external reserve rises by $515 million in 12 days
According to a report from Reuters, the naira is expected to remain stable in the coming week as currency traders watch for policy details at CBN’s first MPC meeting in 2021.
Also, the exchange rate at the black market where forex traded unofficially still remained flat at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 20, 2021.
The exchange rate disparity between the parallel market and the official market is about N81, representing a 17% devaluation differential.
READ: Naira strengthens at NAFEX window despite 38% drop in dollar supply
The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N394/$1. This represents a 17 kobo gain when compared to the N394.17/$1 that it closed on the previous trading day.
- The opening indicative rate was N394.16 to a dollar on Thursday, the same rate that was recorded on Tuesday, January 20, 2021.
- The N415.76 to a dollar was the highest rate during intra-day trading before it closed at N394 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
- Forex turnover at the Investor and Exporters (I&E) window dropped by 13.9% on Thursday, January 21, 2021.
- According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $89.50 million on Wednesday, January 20, 2021, to $77.04 million on Thursday, January 21, 2021.
- The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
- There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.
READ: The dangling fate of indigenous oil upstream operators
Oil price steady rise
Brent crude oil price is at about $56 per barrel on Wednesday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.
- This appears as a boost to Nigeria as the country’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 million barrels per day.
- Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
- The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
- This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.
READ: Nigeria faces prolonged exchange rate crisis as oil prices remain stuck at $40
Nigeria rising external reserves
- The external reserve has risen to $36.464 billion as of January 19, 2021.
- Nairametrics reported on Wednesday that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
- The external reserves have increased by $1.09 billion since December 31, 2020, when it closed the year at $35.3 billion.
- Nigeria also needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.
Currencies
Official (NAFEX) Exchange rate hits N415/$1 during Intra-day trading
The exchange rate at NAFEX trades at N415/$1 during Intra-day trading NAFEX as forex turnover rises by 233% rise
On January 20, 2021, the exchange rate between the naira and the dollar depreciated closing at N394.17/$1 at the NAFEX (I&E Window) where forex is traded officially.
However, during intraday trading, the exchange rate traded for as high as N415.76/$1 the highest intraday trading tracked by Nairametrics. Forex turnover also rose significantly by 233.6% as demand puts pressure on the foreign exchange market.
On the flip side, the exchange rate at the black market where forex traded unofficially still remained stable at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 19, 2021.
READ: Naira strengthens at NAFEX window despite 61% drop in dollar supply
The exchange rate disparity between the parallel market and the official market is about N80.83, representing a 17% devaluation differential.
The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.17/$1. This represents an 82 kobo gain when compared to the N393.35/$1 that it closed on the previous trading day.
READ: FIRS hits 98% of target as it collects N4.95 trillion for 2020 fiscal year
- The opening indicative rate was N394.17 to a dollar on Wednesday, representing a 21 kobo drop when compared to the N393.96 that was recorded on Tuesday, January 19, 2021.
- The N415.76 to a dollar was the highest rate during intra-day trading before it closed at N394.17 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
- Forex turnover at the Investor and Exporters (I&E) window increased significantly by 233.6% on Wednesday, January 20, 2021.
- According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $26.83 million on Tuesday, January 19, 2021, to $89.50 million on Wednesday, January 20, 2021.
- The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
- The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
- There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.
READ: Naira falls at black market despite over 100% improvement in dollar supply
Oil price steady rise
Brent crude oil price is at about $56 per barrel on Wednesday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.
- This appears as a boost to Nigeria as the country’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 million barrels per day.
- Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
- The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
- This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.
READ: Naira falls at NAFEX window despite 56.6% improvement in dollar supply
Nigeria rising external reserves
- The external reserve has risen to $36.464 billion as of January 19, 2021.
- Nairametrics reported on Wednesday that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
- The external reserves have increased by $1.09 billion since December 31, 2020, when it closed the year at $35.3 billion.
- Nigeria also needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.
Currencies
Naira strengthens at NAFEX window despite 61% drop in dollar supply
The exchange rate between the naira and the dollar appreciated marginally closing at N393.35/$1.
On January 19, 2021, the exchange rate between the naira and the dollar appreciated marginally closing at N393.35/$1 at the NAFEX (I&E Window) where forex is traded officially.
This is as dollar supply dropped by 61% with lower demand.
Also, the exchange rate at the black market where forex traded unofficially maintained stability at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 18, 2021.
READ: Nigeria: Pressure on FX to continue in 2021 – Report
This is as the Central Bank of Nigeria sustains its intervention across the foreign exchange markets to meet the needs of manufacturers and end-users who need dollars for their medical trips, school fees payments, travel allowances, and others.
The apex bank has also resumed its dollar sales to Bureau De Change operators.
The exchange rate disparity between the parallel market and the official market is about N81.65, representing a 17.2% devaluation differential.
The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N393.35/$1. This represents a 48 kobo gain when compared to the N393.83/$1 that it closed on the previous trading day.
READ: Nigeria faces prolonged exchange rate crisis as oil prices remain stuck at $40
- The opening indicative rate was N393.96 to a dollar on Tuesday, representing an 11 kobo gain when compared to the N394.07 that was recorded on Monday, January 18, 2021.
- The N396 to a dollar was the highest rate during intra-day trading before it closed at N393.35 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
- Forex turnover at the Investor and Exporters (I&E) window declined by 61% on Tuesday, January 19, 2021.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $69 million on Monday, January 18, 2021, to $26.83 million on Tuesday, January 19, 2021.
- The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
- The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
- There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.
READ: Naira falls at black market despite over 100% improvement in dollar supply
Oil price steady rise
Brent crude oil price is currently at $54.88 per barrel on Monday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.
- Nigeria’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 million barrels per day.
- Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
- The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
- This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.
READ: A summer of higher food prices, limited room for monetary policy
Nigeria rising external reserves
- The external reserve has risen to $36.3 billion as of January 15, 2021, suggesting that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
- The external reserves have increased by $1 billion since December 31, 2020, when it closed the year at $35.3 billion.
- The unification of the exchange rate was previously cited as a major requirement for receiving the world bank facility.
- Nigeria needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.
