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Tuesday, July 23, 2024

Naira Reaches June Low as Dollar Strengthens

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The naira, Nigeria’s currency, became a bit more stable in the official market, even with some pressure from the U.S. dollar. In simple terms, the naira’s value was better this time when compared with previous trades.

According to FMDQ, the naira dropped by 0.71% against the U.S. dollar. On Monday, it was N1,490.2 per dollar but later changed to N1,500.79 per dollar at the Nigerian Autonomous Foreign Exchange Market.

People who exchange money said that more people wanted dollars because it’s summer, and many are traveling or importing goods from other countries.

The naira stayed strong because new foreign money entered Nigeria. This happened even though the naira’s value had dropped a bit before.

The World Bank and Afreximbank helped Nigeria by giving about $6 billion. This helped to keep Nigeria’s foreign exchange reserves strong and made the naira’s value more stable.

Olayemi Cardoso, the head of CBN (Central Bank of Nigeria), recently shared positive views about the future of foreign exchange in Nigeria. He said that the current market looked calm.

This month, the naira has been quite stable, with just a small range of changes in its value between N1,473 and N1,500 per dollar.

“I think the worst is over. We are happy that people can now buy and sell easily in the market,” Cardoso said.

He also mentioned, “The market is stable; the currency hasn’t moved much in the past two or three weeks after a period of many changes.”

The U.S. dollar is getting stronger

On Tuesday, the U.S. dollar became stronger because of some statements by Federal Reserve officials and reports showing a steady housing market in the U.S.

This signals that the central bank might not cut rates anytime soon.

Fed Governor Michelle Bowman said on Tuesday that she believes the current policy rate might be enough to control inflation for now. She also said she might increase borrowing costs if needed.

“They are cautious and rely heavily on economic data, considering the uncertainties about inflation, which is higher in the U.S. than in other places.”

Even though the U.S. data was mixed, the dollar still got stronger. A survey showed that single-family home prices in the U.S. went up by 0.2% in April, compared to no change the previous month. Over the year ending in April, house prices increased by 6.3%. This helped the dollar rise slightly.

However, the Conference Board noted that U.S. consumer confidence dropped a bit in June, going down to 100.4 from 101.3 in May. Even so, the June figure was slightly better than the 100 expected.

Investors are now waiting for the release of the U.S. personal consumption expenditures (PCE) price index on Friday, which is the Fed’s favorite measure of inflation.

The euro went down by 20 basis points against the dollar, settling at $1.0714. The European currency has been pressured partly due to political issues in France. French President Emmanuel Macron announced early elections this month, adding to the uncertainty.

Political events, including the upcoming French elections this weekend and the first U.S. presidential debate between President Joe Biden and his predecessor, Donald Trump, scheduled for Thursday, were also on the minds of currency traders.

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