The naira oscillated near its 2025 lows amid renewed appetite for the greenback, while the U.S. dollar index posted upside this week
Unofficial market data showed the Nigerian currency fluctuated at the N1625/30/$ band on Friday.
It closed at N1608/$1 on the official market compared to N1612/$1 a day earlier signaling a major bearish period for the exchange rate.
The escalating demand for the haven currency, driven by individual and corporate requirements to meet fundamental needs and import commitments, precipitated a decline in the value of the naira.
The Nigerian naira exhibited a subtle yet consistent depreciation throughout four trading sessions in the regulated foreign exchange market despite the ongoing reforms by the CBN.
Markets’ actions show sophisticated investors are bearish on the local currency this year, as the greenback sparks global recovery amid lesser trade tensions in the global economy
Forecasts of further naira depreciation were reflected in the forward contract rates in the derivatives market: the 1-month forward closed at N1,646.57 per dollar, the 3-month at N1,724/$, the 6-month at N1,837/$, and the 1-year forward at N2,056/$
U.S. dollar index hit a month high
The US Dollar Index, which measures the greenback’s strength against a basket of currencies, reached a nearly one-month high around the 100.8 region, signaling the start of a bullish consolidation phase.
The dollar index is still expected to post weekly upside for the third consecutive week and appears ready to build on its recent rebound from a multi-year low reached in April. Jerome Powell, the chair of the Federal Reserve, stated that waiting for more clarity is the best course of action because there is a lot of uncertainty surrounding US trade tariffs.
The Federal Reserve Bank will not lower interest rates anytime soon. Furthermore, the US-UK trade agreement helps allay fears that a full-scale trade war might cause a US recession and gives hope for more agreements with other nations.
The greenback recovered its strength thanks to traders’ optimism after the United States and the United Kingdom announced a trade agreement. This is the first such agreement since Donald Trump’s wave of customs tariffs.
This compromise, which was negotiated over several weeks and described as “historic” by the American president, will allow the United Kingdom to open up more to American products for “several billion dollars,” “in particular for American beef, ethanol and almost all the products produced by our dear farmers,’ Donald Trump promised
Keir Starmer, the British Prime Minister, described the deal as “extremely important” for the country’s steel and automotive industries. Specifically, Downing Street has announced that the United States will lower its 25 per cent tax on imported automobiles to 10 per cent for British cars.
Not only has the UK-US trade agreement improved the greenback’s prospects, but Trump has also hinted at the possibility of reducing tariffs in China.
Trump has promised that the European Union (EU) and China, with whom he will hold trade talks this weekend in Switzerland, want to work with us. The Chinese market should “open up” to American businesses, he added, and the president expected talks with Beijing to be “considerable.”
In addition, ongoing geopolitical threats from the long-running conflict between Russia and Ukraine, the escalation of Middle Eastern tensions, and the India-Pakistan border support the safe-haven buck’s optimistic short-term outlook.
