Attractive U.S yields add pressure on Nigerian naira

When the interest rates in the U.S. go up, it can make the U.S. dollar stronger. This can affect other countries’ money, like the Nigerian naira, and make it weaker.

Recently, the rate for a 10-year government bond in the U.S. went up by about 14 points to 4.479%.

People think this happened because there’s a higher chance that Donald Trump might win the U.S. presidency again. If Trump wins, he might increase taxes and borrow more money.

The Nigerian naira had been losing value for five days but then stopped losing between June 24 and 28. However, it still couldn’t go above N1500.

On Monday, in the official forex market, the naira was worth a little less compared to the U.S. dollar. It closed at N1,508.99 for one dollar, while it was N1,505.30 on the previous Friday. In the black market, the naira traded at N1,510 at midday on Monday, a little better than N1,520 on Friday, gaining about 60 points.

Olayemi Cardoso, the head of Nigeria’s central bank, said he was happy with the steps taken to make the naira stable. He also mentioned that the big changes in the naira’s value might slow down. But, in the short term, the naira might face more challenges because the U.S. dollar is getting stronger.

Even though efforts to keep the naira steady are ongoing, its value against the U.S. dollar has been between N1,400 and N1,525 in both official and unofficial markets for the past few months.

How Rising U.S. Yields Boost the U.S. Dollar

The dollar index, which measures how strong the U.S. dollar is against six other major currencies, went up by about 20 points and traded at 105.9 during midday.

The 10-year bond yield was the highest it’s been since the start of the month on Tuesday, dropping by 2 points for the day to 4.4554%. The euro lost some of its small gains, and the U.S. dollar got stronger. The euro was down by 0.2% at $1.07188.

The bond market worried about Trump’s spending plans, so the U.S. dollar kept going up. After the U.S. Supreme Court confirmed that Trump has some immunity in the riot charges about a breach at the U.S. Congress, the chances of him becoming president again increased.

The U.S. bond market is concerned about where the money will come from because of Trump’s spending plans. This could make inflation go up again.

Currency traders were also keeping an eye on U.S. job openings data coming later in the day and comments by Jerome Powell, the Federal Reserve Chair, at an event in Portugal.