The U.S. dollar index was on track for its first weekly fall in 2024 while the naira appreciated at the official and black markets.
The naira strengthened to N1,595 against the greenback in the official Nigerian Foreign Exchange Market on Thursday.
The indicative exchange rate for NAFEM dropped from N1,609.51 per dollar on Wednesday to N1,595.11 against the US dollar, according to data from FMDQ.
In a similar vein, on the parallel market yesterday, the value of the naira increased from N1,610 per dollar on Wednesday to N1,490 per dollar. Remember that the modest improvement came before the Central Bank of Nigeria, or CBN, published some foreign exchange guidelines in recent weeks.
After an almost two-month rally supported by anticipation that the Federal Reserve will start cutting rates later than originally anticipated, investors took a break from purchasing the currency.
The first Fed rate decrease is now expected in June rather than May, and investors have drastically lowered their estimates for how much the US central bank will cut its benchmark rate.
This year, the markets were pricing for as many as seven 25-basis point cuts, while Fed officials had only anticipated three. It’s also possible that traders are factoring in the possibility that economic statistics could start to weaken.
Despite better-than-expected data on inflation and the labour market in January, New York Fed President John Williams believes the US central bank will decrease interest rates “later this year
Next week’s Personal Consumption Expenditures (PCE) report could also provide market hints about Fed policy.
At 103.93 index points on Friday, the dollar index remained essentially unchanged from the previous day and headed for a weekly loss of 0.34%. It is still below a three-month high of 104.97, which was hit on February 14. It has recovered from a five-month low of 100.61 on December 28.
Consequently, due to the ongoing strength of the economy and the Fed’s caution against reducing rates too soon as they work to return inflation to its target of 2% annually, the value of the dollar has increased this year. Currently, meanwhile, investors are waiting for further economic data to provide new information about monetary policy.
By year’s end, the Bank of America anticipates that the euro will appreciate 1.15 against the US dollar. The increased willingness to take risks, which has caused stock markets to record highs in some nations this week, might have also decreased demand for the US dollar, which is viewed as a haven currency
