The naira lost nearly a fifth of its value as it traded at N951.2/$ on the official Investor and Exporter forex window on Wednesday.
Data from FMDQ Securities Exchange highlighted that the naira lost N144.5 against the greenback after closing trading on Tuesday at N806.7/$
The naira’s volatility in the market continued despite efforts by the Central Bank of Nigeria to stabilize the national currency.
The bears have all to play for if the naira loses the psychological support level of N1000/$ at the official market, as such a breach will likely lead to more losses for the local currency
The delay in FX support from Nigeria’s foreign partners has also resulted in the naira losing face in the official market.
Price action indicators have enough areas to move in the naira’s direction away from strong oversold levels in the official FX market.
Moreover, if the opposite happens such as the apex bank getting the much-needed FX liquidity support, the naira may find an opportunity to bounce higher and break the N900 resistance level
The local currency has been drifting towards the parallel market level as the central bank has yet to clear outstanding foreign currency amounts owed in forward deals.
In an ironic twist, the naira showed a high degree of stability at the unofficial foreign exchange market following central bank efforts to improve dollar liquidity while remaining volatile on the official market.
The P2P and street value swung between N1,140 and N1,170 against the greenback in the past few weeks and showed a higher form of stability as against the third quarter, there has been a noticeable break in the naira’s volatility since the apex bank loosened exchange-rate controls in June.
Mr. Olayemi Cardoso, the CBN chief, last month pledged to curb inflation and stabilize the naira declaring that the apex bank will clear forward foreign exchange contracts that have weighed on the troubled Nigerian local currency.
Consequently, the naira has been unable to edge the U.S. dollar index out despite falling lower, but the greenback remained near a two-week high, ahead of key employment data
Most recent data have indicated that the U.S. economy, affirms a soft landing is still likely. In the release on Tuesday, the strongest indication yet that rising interest rates in the United States were stifling the demand for workers came in October when job openings hit a 2-1/2-year low.
The US dollar index is currently trading below 104 index points. A move above 104.5 index points would not be out of the ordinary, but a break above it could cause the rally to continue because of the liquidity gap and add more pressure on the naira.
However, price action patterns conclude that the US dollar is following its seasonal pattern showing a decline in momentum below or around 105.5. In that case, naira bulls hope for the U.S dollar index to break below 103 index points
