In the past week, the Naira had trouble keeping at N1,600 in the official foreign exchange (FX) market, even though the US Dollar index was at its lowest level since January.
According to FMDQ data, the value of the Naira dropped by N15.41 to N1,579.89 per dollar on Friday, compared to N1,564.40 on Thursday. This quick drop also affected Africa’s biggest telecom company by revenue.
In the black market, the Naira stayed at N1,600/$ in different parts of Nigeria’s business center. MTN Group, a large telecom company, reported fewer earnings mid-year because the Naira kept losing value and there was conflict in Sudan.
Africa’s top oil producer is trying to fix its infrastructure funding problems and improve its weak foreign exchange market by issuing dollar bonds within the country. The market conditions have not been good for issuing Eurobonds.
The federal government has approved a N28.8 trillion spending plan for 2024, with a N9.8 trillion deficit. They plan to cover this deficit with both local and foreign loans.
US Dollar Index Drops to January Low
On Monday morning, the US Dollar kept losing value, reaching 102 index points, the lowest since early January. Investors are watching closely what Federal Reserve officials will say this week, although there are no major economic reports expected. The market’s positive mood and falling US Treasury yields helped push down the value of the safe-haven US Dollar on Friday.
Even though there was a stronger-than-expected improvement in US consumer sentiment reported later that day, the USD continued its decline.
The USD Index finished lower for the sixth week in a row, falling more than 0.5% on Friday.
More interest in risk and falling US Treasury bond yields made it hard for the USD to hold its ground going into the weekend.
More Insights
The US 10-year yield is still below 3% on Monday morning in Europe, and US stock index futures are almost unchanged for the day.
Over the weekend, Federal Reserve members Mary Daly and Austan Goolsbee suggested that there might be a cut in interest rates in September. This week’s final policy meeting minutes are expected to lean towards this view. Investors expect Fed Chair Jerome Powell to talk about the need for a rate cut on Friday in Jackson Hole.
Barclays economist Christian Keller stated that the scare over US inflation that had been a big concern since the pandemic might be letting up, although it’s too soon to be certain. Central bankers will likely be cautious in their statements.
The futures market indicates a 25% chance of a 50 basis point cut, which could change based on upcoming payroll data.
A quarter-point change is fully anticipated. The annual benchmark revisions to job data, expected this Wednesday, might show a reduction of 600,000 to one million jobs, which could make the job market look weaker than it really is. It is expected that the US will avoid a hard economic landing.
Federal Reserve policymaker Christopher Waller is set to speak later today. Waller, known for favoring higher rates, might reject calls for rate cuts, which could strengthen the USD.