Sure! Let’s break it down and keep it simple for everyone:
The value of the Naira, Nigeria’s money, has fallen for the fifth day. Even though the Central Bank of Nigeria (CBN) tried to help, the Naira is now at its lowest since March. People really want U.S. dollars and there is a lot of uncertainty in the world right now.
The exchange rate between the Naira (NGN) and the U.S. dollar (USD) is very low. More people think interest rates will go down, making the dollar stronger. Some think this has to do with predictions about Donald Trump becoming president again.
Official data from FMDQ shows the Naira at N1,577 per U.S. dollar on Monday. This is the lowest since March 15. Last Friday, it was N1,563.8 per dollar.
The CBN has been increasing interest rates to control inflation, which is when prices go up. They are trying to keep the economy stable.
But inflation is still very high. Data showed that Nigeria’s inflation is at a 28-year high. It was 22.79% in June 2023 and jumped to 34.19% in June 2024. That’s a big increase over one year.
There are also other reasons for pressure on the Naira. Businesses and people who want to travel abroad need more dollars. Even after the CBN sold $122.7 million to local dealers on July 10-11, it was not enough to meet demand for dollars.
In the U.S., the dollar started the week with small gains but is still near its lowest point since April. The U.S. economy is cooling down, which makes people think the Federal Reserve might lower interest rates in September. Because of this, the dollar is not doing so well. In London, the dollar index (a measure of the dollar’s strength) went up slightly but remains weak.
Trump’s Assassination Attempt and the Dollar
Recently, there was an alleged attempt to assassinate President Trump. Some people believe this could make him more popular and increase his chances of winning a second term as president.
If Trump becomes president again, he might put in place policies that protect U.S. trade. This could lead to higher prices, meaning inflation could go up. In the long run, this might keep interest rates high, which can make the dollar stronger.
However, the Federal Reserve might cut interest rates by at least 25 points in September. Some recent signals from the Fed and weak inflation data support this. Because of this, the dollar could not gain much strength last week.
Looking Ahead at the U.S. Dollar
People are now waiting for data on retail sales, which might give new clues about the U.S. economy slowing down. The current chances of a 25-point rate cut in September are around 86%, making it very likely to happen. The U.S. 10-year benchmark rate is now at its lowest since April, at 4.20%.
The dollar index has daily indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) showing it’s very low. The DXY index has fallen below its 200-day Simple Moving Average (SMA) support and is now at its lowest since April.