This week started tough for Nigerian money. The U.S. dollar is doing really well all over the world.
Right now, 1 Nigerian naira (NGN) is very low when you compare it to the U.S. dollar (USD). People think the U.S. might lower their interest rates soon.
The Nigerian naira is now at N1,596.6 for $1. This happened because there is not enough foreign money to trade in Nigeria’s official exchange market.
Last Friday, it was N1,570.14 for $1. So, it dropped by 1.66%, according to FMDQ data.
People are trading less money now. On Friday, the market turnover was $120.81 million. By Monday, it dropped to $102.93 million, which is 14.8% less.
But in the black market, the naira did a little better. On Monday, it was N1,610 for $1, compared to N1,615 for $1 on Friday.
The naira keeps changing a lot. Since June last year, it has dropped by over 45% and keeps going up and down.
Jerome Powell, the U.S. Federal Reserve boss, said they might cut interest rates on August 23, 2024. But this news didn’t change things much right away.
The Central Bank of Nigeria (CBN) wants prices to stay stable. They also want people to invest in naira. That’s why they keep the interest rates high.
But even though they raised the interest rate by 800 basis points to 26.75% in less than a year, the naira is still weak. This is because there are other problems like not enough investment, low oil production, and safety issues.
U.S. Dollar Index Shows Strength
The U.S. Dollar Index got stronger on Monday. It was around 101 points after it went down last week. Jerome Powell’s talk made people think the U.S. might make money rules easier soon.
Because of this, the 10-year U.S. yield fell below 3.8 points, which was not good for the USD. People seem too excited about easy money rules, even though the economy is growing well.
The market seems to be confused. The dollar index is at its lowest since December, which means selling pressure might slow down a bit.
The Relative Strength Index (RSI) is still below levels that would mean it’s too low, so the dollar might go up a bit more.
But there are no clear signs that things will get better soon. The dollar index might still go down. Important levels to watch are 100.00, 100.50, and 100.30.
Citi’s Outlook on the Dollar Index
- Citi thinks the U.S. dollar could get stronger. They mentioned a few reasons for this.
- The global bank said the U.S. Dollar Index, which shows how strong the dollar is compared to six other big currencies, is near important support levels between 100.30 and 100.82 points.
- Citi also noticed weak spots in the European Union’s economic data and things in the U.S. that could help the dollar, like upcoming elections.
- History shows that September is usually a good month for the dollar, with good returns in eight of the last ten years.
- According to Citi, when people are scared, they often choose the U.S. dollar for safety.