Naira stable across segments as oil demand rebounds

ANALYSTS AT AFRINVEST say they expect the naira to trade on the same band this week in the foreign exchange market as it did last week across different FX segments.

During the week, the Nigerian naira maintained stability across all market segments as oil demand continues to rebound to pre COVID-19 levels globally. Nevertheless, oil price declined 0.3 per cent week on week to $44.96 to a barrel as on Friday. Similarly, on the domestic front, the external reserves declined 0.2 per cent week to week to $35.6 billion despite there been no FX sales during the week.

In the FX market, the CBN spot rate traded flat all week at N381 to one United States dollar while the rate at the parallel market closed flat week on week at N475 per US$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate closed flat at N386 to US$1.

Similarly, the activity level in the I&E Window declined this week as total turnover increased 7.5 per cent to $191.2 million from $177.9 million recorded in the previous week.

At the FMDQ Securities Exchange FX Futures Contract Market, the total value of open contracts settled at $12.9 billion, up 0.2 per cent ($23.4m) from the prior week. The July 2021 instrument (contract price: N418.27) had the most demand with an additional subscription of $4.0 million putting the total value at US$69.0 million. Meanwhile, the August 2020 instrument (contract price: N388.69) saw sell-off worth US$30.2 million as the total value settled at US$1.6 billion.

U.S. dollar slides, posts worst weekly run of losses in a decade

The dollar dropped on Friday, falling for eight straight weeks, as investors looked to other currencies whose economies are currently outperforming that of the United States in terms of managing the coronavirus pandemic.

The delay in the passage of additional U.S. stimulus for virus relief did not help the dollar’s cause as well.

The dollar’s eight consecutive weeks of losses represent its longest weekly run of declines in a decade, Refinitiv data showed, with Friday’s decent batch of U.S. economic data failing to lift the greenback.

“Because of higher coronavirus case counts in the U.S., you have the prospect of longer restrictions,” said Ranko Berich, head of market analysis, at Monex Europe in London. “You have the prospect of longer-lasting drags to human behavior and that means slower recovery in the United States than other developed economies.”

The United States has 5.01 million confirmed coronavirus cases and more than 160,000 deaths, more than any country.

Hopes for additional stimulus to combat the pandemic faded on Friday, with the Senate and House of Representatives in recess and no fresh talks scheduled with U.S. President Donald Trump’s negotiators.

Trump, however, announced on Friday the White House is preparing to provide relief for the economic pain caused by the virus as legislation stalls in Congress, saying his administration is ramping up to send money to families, state and local governments, and businesses.

Markets, however, reacted little to his announcement.

In afternoon trading, the dollar index slipped 0.1% to 93.124 =USD. The eight weeks in a row of losses was the worst losing streak since June 2010.

The dollar was unmoved after data showing a 1.2% rise in the U.S. retail sales’ headline number in July, which was lower than expected, but a higher than forecast gain of 1.9%, excluding autos.

Other reports such as U.S. consumer sentiment and industrial production had little dollar impact on Friday.

Against other currencies, the dollar had its best weekly percentage gain versus the yen in two months. It was last down 0.3% at 106.60 yen .

The euro, meanwhile, continued its rise, up 0.2% at $1.1835 EUR=EBS, rising for eight straight weeks.