The Nigerian currency maintained upside against the American dollar as the United States Central Bank makes an important interest decision later today.
The U.S dollar plummeted to N1,484.13 on Tuesday in the Nigerian official foreign exchange (FX) market, which was N13 higher than the N1,497.5/$ quoted on Monday.
However, the naira traded at the N1520/$-N1530/$ band at the physical black market in Nigeria’s business capital at the mid-week trading session.
Nigerian Banks’ naira debit card dealing with FX transactions had also led to a drop in FX demand, providing Naira bulls with enough ammunition to hold below the N1,500/$ support line. The naira is experiencing a period of stability, one year after a precipitous decline against the dollar.
Naira bulls might gain some momentum in the mid-term amid projected moderation in Nigeria’s inflation readings.
Nigeria’s inflation rate decreased for the fifth consecutive month, providing respite to consumers burdened by consistently high living expenses.
NBS data revealed that Nigeria’s inflation rate dropped to 20.12% in August.
The average change in prices of goods and services is measured by the Consumer Price Index (CPI), which rose slightly from 125.9 points in July to 126.8 points in August.
According to the NBS report, month-over-month inflation was 0.74%, significantly lower than the 1.99% recorded in July, indicating that price increases are slowing across Nigeria
“Compared to the headline inflation rate of 21.88 per cent in July 2025, the headline inflation rate dropped to 20.12 per cent in August 2025,” the agency said.
The main driver of inflation in Nigeria, food inflation, also decreased in August but stayed high. The index fell from 37.52 per cent in August 2024 to 21.87 per cent year over year. Food inflation decreased to 1.65 per cent monthly from 3.12 per cent in July.
U.S Dollar Fairly Stable Ahead of U.S Interest Rate Decision
The US Dollar Index (DXY), which gauges the US dollar’s (USD) value against a basket of six other currencies, stays steady at 96.70 as investors increase bets on a rate cut by the Federal Reserve (Fed) later this week.
- Markets anticipate a 25-basis-point (bps) rate reduction at the Fed’s September meeting, driven by the slowdown in the US labor market.
- Traders currently price in nearly a 100% chance of a quarter-point rate cut at the upcoming meeting, according to the CME FedWatch tool. A few even believe a larger rate cut might happen.
- Fed Chair Jerome Powell will hold a press conference after the policy decision.
However, the event may be clouded by concerns about political influence on the independent central bank, given Trump’s ongoing criticism of Fed Chair Jerome Powell for his rate decisions and his actions in firing Governor Lisa Cook, which led to a legal dispute.
U.S. retail sales increased by 0.6 percent in August, for the third consecutive month, and at a faster rate than expected, according to a report released by the US Census Bureau on Tuesday. Latest American economic data indicated that US consumers were resilient despite a weakening job market, persistent inflation, and slowing economic activity.
Currency traders bet that the US Federal Reserve will cut borrowing costs by at least 25 basis points to help the softening labor market at the conclusion of a two-day policy meeting later today.
Additionally, traders will have been factoring in the potential for two more rate cuts by the end of this year.
Fed Chair Jerome Powell’s remarks at the post-meeting press conference and revised economic projections will be closely watched for clues regarding the rate-cut path, in addition to the important rate-cut announcement. The USD may be capped in the interim because of the dovish outlook.
- President Donald Trump increased pressure on the EU and NATO nations to “stop buying oil from Russia,” saying Zelenskyy will “have to get going and make a deal” to end Russia’s invasion of Ukraine.
- The U.S. Central Bank announced that Stephen Miran, the head of Trump’s Council of Economic Advisers, had taken the Fed governor’s oath of office early Tuesday as the FOMC, which sets interest rates, began a two-day policy meeting. Miran became one of the 12 voting members of the FOMC after narrowly winning a Senate vote on Monday night. Economists predict that he won’t significantly change the outcome this week.
- The euro reached its highest level against the US dollar since September 2021, trading at 1.1847. The euro experienced its strongest performance in nine months in 2025, rising nearly 14 percent. In July, it had already hit a previous high.
The appeal of the euro is reinforced by expectations that the ECB will not cut rates further and that the Fed may pursue a cycle of rate cuts.
Nairawatch is good.