The Naira did better against the US dollar in Friday’s trading session.
However, it didn’t do as well against the British pound, which went up a lot because of some news from the Federal Reserve’s boss, Jerome Powell. He said that they might cut interest rates in September.
According to FMDQ data, the naira went up against the dollar to N1570.14/$, better than the N1586.1/$ it was on Thursday.
This means the naira gained N16 against the US dollar compared to Thursday’s trade rate in Nigeria’s FX Market.
The naira also got stronger in the black market, increasing from N1620/$ to N1615/$ on Friday. The Central Bank of Nigeria (CBN) has been working extra hard this month to make the naira’s exchange rate more stable.
This is part of why the naira is getting stronger against the dollar. Plus, the dollar is not doing as well because of softer news from the Federal Reserve.
The naira started going up after hitting N1912/$ in late February. It went below N1000/$ in April and is now around N1585/$.
Some Nigerian businesses think the naira will get weaker before it gets better in late 2024 or early 2025, according to a recent survey by the CBN. Even though the CBN has been adding money to the forex market, people are still worried.
Still, many Nigerian businesses are hopeful despite fears about the naira’s near future. Over 1,600 Nigerian businesses took part in the CBN’s Business Expectations Survey. They expect the naira to get weaker in July and August and over the next three months.
The US Dollar Falls Against Other Big Currencies
The euro reached a 13-month high due to the weakening dollar, and the US currency fell to a 17-day low against the yen. “The time has come for policy to adjust,” Powell said in a big speech at the Kansas City Fed’s yearly event in Jackson Hole, Wyoming. Powell noted that while risks to inflation are less, risks to jobs are more.
Powell said, “We do not want more cooling in job conditions. As we near price stability, we will work hard to keep a good job market. There’s reason to think the economy will return to 2 per cent inflation and a strong job market with some loosening of rules.”
Traders guessed that the Fed would cut interest rates by a small amount in September. Powell’s words made people think there’s a 65% chance of this happening at the September 17–18 meeting. But it also made people think there’s a bigger chance of a larger cut.
Because of this, the dollar index, which tracks the US dollar’s power against six different currencies, went down a lot. The index was doing a little bit better before Powell’s speech, but it dropped by 0.81% to 100.64 points by late Thursday.
Later on Friday, Austan Goolsbee, the boss of the Federal Reserve Bank of Chicago, said that even though he isn’t ready to push for a rate cut, the current money rules are very tight and don’t fit with the current economy.
Powell’s words about the dollar and good news in the UK economy helped the British pound reach a two-year high against the US dollar.
The pound went up 0.94% to $1.3211 by late evening. It passed the 2023 high to reach $1.32295, its highest level since late March 2022.
Positive news in the UK economy was supported by an August survey showing British consumer confidence holding at almost a three-year high.
The euro ended the day up 0.75% at $1.1195, hitting a high of $1.12015 on Friday afternoon, the highest since July 20, 2023.
This August’s low for the dollar/yen was reached. By the end of the day, the yen dropped by 1.36% to 144 points. The Bank of Japan’s boss, Kazuo Ueda, said earlier on Friday that he would raise rates if inflation kept going and reached the bank’s 2% target, which helped the yen.