While traders gambled that the Federal Reserve was done hiking interest rates, the Naira held its solid position in the black market. However, the gain of the naira bulls was restrained as they awaited important nonfarm payroll data.
Currency traders on Binance’s P2P market recently traded the naira as high as N972/$ late on Thursday, following a quick recovery and erosion of the critical resistance level of N1,000/dollar.
Nigeria has the most peer-to-peer exchange volume in the cryptocurrency sector, according to a Chainalysis study report.
Read Also: JP Morgan forecasts the naira against the US dollar will reach N850 by December
Nigeria rose from 18th place in 2021 to 17th place in 2022 in terms of P2P exchange volume.
On Thursday, November 2, in the official NAFEM window, the naira hit an intraday low of N1,018.6 to the US dollar at the official market.
But the naira faced an uphill battle against the dollar later on Friday with the announcement of significant nonfarm payroll data for October.
The labour market’s resilience provides the Fed with another justification to hike interest rates, potentially reversing some of this week’s currency weakness.
Although the ultimate decision will mostly depend on more economic data, the Federal Reserve is still willing to hike interest rates this year.
It is evident from price behaviour that the US Dollar Index’s surge appears to be tense.
According to fractal dimensions, market variety looks to be minimal given that the DXY Index reached a multi-month high last month.
Not too far from its one-week low of 105.8 points, the US dollar index, which measures the US dollar against six competing currencies, stood at 105.9 index points on Thursday. This week, a 0.4% fall in the index is predicted, marking the third weekly decline since July.
According to the CME FedWatch tool, the market is currently pricing in a less than 20% possibility of a December rate hike, down from 39% a month earlier, following the U.S. Fed’s interest rate pause.
However, the Fed did not rule out further rate increases, demonstrating the resilience of the biggest economy in the world.
As a result, The CBN began to pay down the excess of foreign exchange forward contracts, which was expected to strengthen the naira, the business community, and the largest economy in Africa overall.
It is known that foreign airlines are allegedly benefactors as well, even if it is unclear where the money from to clear the backlog came from.
With more than 75–80% of the commitments under foreign exchange forward contracts fulfilled, Tier 2 Nigerian banks and foreign banks were the primary focus of Nigeria’s central bank.
According to research, the companies getting FX futures deliveries this week include Standard Chartered ($63 million), Stanbic ($125 million), and Citigroup ($72 million).
The FG added that it anticipated spending $10 billion to settle foreign exchange liabilities, boost the nation’s foreign exchange market, and keep the naira stable.
The Finance Minister, Wale Edun, predicted that FX liquidity will rise throughout the next few weeks. He added that talks are still in the early stages with sovereign wealth funds that are prepared to make investments and give advances in addition to investments.
