The Nigerian currency appreciated for the 4th consecutive week to settle at ₦1,245 against the dollar amid amplified confidence in the naira.
The naira gained momentum and hit its highest level against the greenback since it was devalued in January.
The Nigerian local currency ended the week at ₦1,251.05/$1, according to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), up against the US dollar at the official window for the fourth straight trading day in April 2024.
Recall that Mr. Olayemi Cardoso, led Central Bank of Nigeria (CBN),has implemented several policies to increase local dollar liquidity and free up the naira.
According to the Economist Intelligence Unit (EIU) had predicted further depreciation of the naira, but so far, the naira has defied it. The EIU predicted the value of the Nigerian Naira would eventually level out at roughly ₦2,000 per US dollar this year.
However, current fundamentals and price actions indicate that the Nigerian Naira faces significant resistance, especially when the US dollar is strengthening amid strong U.S economic data despite a hawkish CBN as the naira oscillates not too far from a key support level of ₦1200/$.
The Nigerian Central Bank raised the benchmark interest rate by 600 basis points to 24.75 percent this year in response to the country’s rapidly rising inflation. However, the CBN’s overall aggressive strategy has brought about some stability.
This strategy includes cracking down on the unofficial market and virtual service providers who are allegedly amplifying the naira’s weakness by driving demand for the dollar pegged USDT
With the nonfarm payrolls report for March coming in significantly better than anticipated, the dollar index continued to rise modestly in London trade.
Markets sharply reduced expectations that the Fed will cut interest rates by as early as June due to the hot labor market. Trader expectations of a 25-basis point cut in June have decreased from last week’s 55 percent to approximately 51 percent.
The CME Fedwatch tool highlighted that expectations for a hold increased to 46.8% from 39.6% last week.
Wednesday’s consumer price index data for March is expected to provide additional inflationary cues.
Wednesday is also the deadline for the Fed’s March meeting minutes, which should provide additional hints after several officials cautioned that the bank was not in a rush to lower interest rates.
