The Nigerian naira has traded for the third day in a row against the dollar at the same rate of N1,650 for $1 in the street market.
In the official market, data from NAFEM showed that the local currency settled at N1,544 per dollar. This is a N5 increase from the previous day’s rate of N1,539 per dollar.
The naira is one of the worst-performing currencies in the world right now, even though more money is being sent out from the country’s foreign exchange reserves.
Even though the U.S. has lowered its interest rates, the Nigerian naira still faces many challenges.
One big problem is that Nigeria’s crude oil production, which is a major source of foreign exchange, remains low. This means recent efforts by the Central Bank of Nigeria haven’t helped the naira much.
People who bet that the naira will fall are still strong in the street market. The naira will likely face more selling pressure as more people need foreign exchange for things like school fees, vacations, and fuel imports.
Cordros Research thinks the naira will trade between N1,400 and N1,500 per dollar by the end of the year. This is based on a report called “Bridging Reforms to Recovery.” They expect this to happen if the Central Bank of Nigeria keeps up its efforts to reform foreign exchange policies and maintain high interest rates, among other things.
But they also warn that if things don’t go well, the naira could fall to between N1,500 and N1,600 per dollar.
Dollar Index Within Range in Global Market
After Federal Reserve Chairman Jerome Powell said that a 50-basis point (bps) rate cut would not be the new normal, traders quickly recovered their initial losses but then lost some ground again. The future changes will depend on economic data that comes out before each rate decision.
Some traders are talking about the possibility of another 50 basis point rate cut, especially since the weekly Jobless Claims report was lower than expected. The Philadelphia Manufacturing Index also showed a slight increase.
The US Dollar Index (DXY), which measures the value of the US dollar against six other currencies, is back within its range after a brief dip. Recently, its movements have been influenced by factors outside the usual. With the recent Fed rate cut, a gradual weakening of the currency is expected. If economic data keeps getting worse, the Fed might cut rates by another 50 basis points in November.
The upper limit of the recent range is at 101.90. The 55-day Simple Moving Average (SMA) is currently at 102.74 and could lead the index to 103.18 soon. The next uncertain levels are at the 200-day SMA and the 100-day SMA, at 103.79.
The Dollar Index rose by 0.2 percent to 100.48 in early trading on Friday. This is slightly higher than a 12-month low after the Fed’s 50 basis point cut to a range of 4.75 percent to 5 percent.
Markets now see a 40% chance that the Fed will cut rates by another 50 basis points in November, with the possibility of a total of 73 basis points by year-end. By the end of 2025, rates are expected to be at 2.85 percent, which the Fed considers neutral. Before the Fed meeting, the US Dollar was trading at similar levels and even moved higher in anticipation of the US trading session.