Dollar Extends Losses After Powell’s Testimony

CBN Plans $100m Sale At Special Auction

 

The dollar lost ground against other currencies on Thursday after the head of the Federal Reserve was seen as effectively flagging a cut in interest rates later this month.

In the first day of closely watched congressional testimony, Jerome Powell said the case for lower borrowing costs “had strengthened” owing to headwinds caused by global trade uncertainty.

“It’s safe to say that investors were pleased with Jerome Powell’s first day of testimony on Wednesday, with equity markets jumping on his dovish assessment,” said Oanda analyst Craig Erlam.

US equities, which had surged on Wednesday with the Nasdaq ending at a record high, continued to push higher at the opening bell on Thursday.

“The Fed Chairman doesn’t typically provide strong and direct messages on policy direction, which makes predicting future rate movements all the more difficult. But Wednesday’s message was clear, the data is softening — particularly on the inflation side — and downside risks are significant,” Erlam said.

In European afternoon trading, the DAX 30 in Frankfurt and the CAC 40 in Paris both pushed higher, while London’s blue-chip FTSE index slipped fractionally on profit-taking.

Most Asian markets had followed Wall Street’s lead, with Hong Kong jumping 0.8 percent and Tokyo ending the day 0.5 percent higher.

FXTM analyst, Hussein Sayed, said the markets had clearly priced in a quarter-point reduction in US interest rates.

But now, “bets for a (half-point) rate cut have increased significantly after Powell’s testimony,” he said.

Nevertheless, the need for such a big cut also had its negative side, the expert continued.

“This may suggest that the US economic expansion is at a greater risk than what recent data are showing and may also be seen as political influence from the White House,” Sayed warned.

Oil extends rally

Traders said investors were now looking forward to Powell’s second day on Capitol Hill.

Higher-than-expected June inflation data didn’t seem to dent expectations that the Fed would go ahead with a rate cut.

Consumer prices rose 0.1 percent month-on-month, while 12-month inflation excluding volatile energy and oil prices, added a tenth of a percentage point to 2.1 percent.

“One could tell just how locked in on the interest rate issue the market is with the release of the Consumer Price Index for June,” said market analyst Patrick O’Hare at Briefing.com.

“The key takeaway from the report was that the (year-on-year) uptick in core CPI should seemingly diminish the prospect of a 50-basis points rate cut at the July meeting.”

Oil prices extended the previous day’s surge that came on the back of data showing a bigger-than-expected plunge in US oil inventories as well as a brewing storm in the Gulf of Mexico that could hit production.

British accusations that Iranian boats tried to “impede the passage” of a British tanker in the Strait of Hormuz reinforced geopolitical concerns.

Key figures around 1330 GMT

London – FTSE: DOWN less than 0.1 percent at 7,525.86 points

Paris – CAC 40: UP 0.3 percent at 5,582.67

Frankfurt – DAX 30: UP 0.1 percent at 12,386.88

EURO STOXX 50: UP 0.3 at 3,511.26

New York – Dow: UP 0.6 percent at 26,955.60

Tokyo – Nikkei 225: UP 0.5 percent at 21,643.53 (close)

Hong Kong – Hang Seng: UP 0.8 percent at 28,431.80 (close)

Shanghai – Composite: UP 0.1 percent at 2917.76 (close)

Euro/dollar: UP at $1.1255 from $1.1251 at 2100 GMT

Pound/dollar: UP at $1.2552 from $1.2504

Dollar/yen: DOWN at 108.25 yen from 108.46 yen

West Texas Intermediate: UP 14 cents at $60.57 per barrel

Brent North Sea crude: UP five cents at $67.06 per barrel

AFP

Bitcoin Drops Below $6,200 For First Time In Three Months

 

Bitcoin plunged 20 percent to a three-month low on Tuesday, its latest sharp loss following a series of setbacks for the cryptocurrency that, with a collapse across global mainstream markets adding to the selling.

The virtual currency fell to $6,190 for the first time since mid-November, according to Bloomberg News, and represents the latest hammering for a unit that saw a stratospheric 26-fold rise last year.

Tuesday’s collapse comes just six weeks after bitcoin hit a record high of $19,511, fuelled by a flood of speculators looking to make a quick buck, with warnings it could fall another 50 percent.

Since those heady days the cryptomarket — which includes dozens of other units — has been pounded by news of crackdowns by governments including in China, Russia and South Korea, one of the biggest markets for the sector.

On Thursday, India said it would “take all measures to eliminate” cryptocurrencies’ use as part of a payment system and in funding illegitimate activities, while Japanese authorities raided a virtual currency exchange after it lost $530 million to hackers.

Central bank in Europe, Japan and the United States have also flagged concerns about the unit and this week saw several commercial lenders say they would stop allowing their customers to buy bitcoin through their credit cards owing to debt concerns.

Stephen Innes, head of trading for Asia Pacific at Oanda, said “the dynamics behind the moves are regulatory clampdowns and investors losing confidence in crypto”.

The sell-off on Tuesday was exacerbated by crushing losses on world stock markets, with the Dow on Wall Street suffering its biggest one-day points loss and wiping out all its 2018 gains.

The global rout comes as panicked investors fret over rising US borrowing costs, leading them to cash in profits after a stellar couple of months that have seen many indexes hit record or all-time highs.

Equities have enjoyed months of surges fuelled by optimism over the US economy, corporate earnings and the global outlook.

But while traders have been piling into equities, pushing many global indexes to record or multi-year highs, there has been growing concern on trading floors about elevated US Treasury bond yields — at four-year highs — and the likelihood of fresh Federal Reserve interest rate hikes.

“The risk-off tone is hitting Bitcoin almost as hard as a global regulator and bank scrutiny,” said Greg McKenna, chief market strategist at AxiTrader. “The latest dent to the Cryptospace has been banks saying they are shutting down the ability of clients to buy bitcoin with their cards.”

“This could end up a full round trip back into the $1,850/$2,966 region.”

AFP

‘I Want To See A Strong Dollar,’ Says Trump

US President Donald Trump speaks to the press before a meeting in the Pentagon in Washington, DC. Brendan Smialowski / AFP

President Donald Trump waded into the uproar over the US currency Thursday, saying he wants to see “a strong dollar,” after comments by his Treasury secretary appeared to signal the opposite and sent the dollar plunging to three-year lows.

In comments to CNBC, Trump said Steven Mnuchin’s remarks a day earlier, which seemed to favor a weak dollar to help US exporters, “were taken out of context.”

“Ultimately, I want to see a strong dollar,” Trump said, speaking on the sidelines of the World Economic Forum in Davos, Switzerland.

That comment sparked a rally in the greenback which had hit a three-year low against the euro earlier in the day, although it was still off about 11 percent from before Mnuchin’s remarks on Wednesday.

“I think they were taken out of context, because I read his exact statement,” Trump said about Mnuchin.

In a nod to the sensitivity of currency markets to any such statements from officials, Trump added: “I don’t like talking about it because frankly nobody should be talking about it.”

Having stated that “obviously a weaker dollar is good for us,” Trump’s Treasury secretary also tried to clarify his comments on Thursday, saying he was not signaling any change in US policy which traditionally has favored a strong dollar.

“I thought my comment on the dollar was actually quite clear… we are not concerned with where the dollar is in the short term,” Mnuchin told reporters.

AFP

MPC Meeting: Currency Traders Optimistic About Naira Value

Naira, dollar, Market FX marketCurrency traders expect a mixed performance for the Naira ahead of next week’s meeting of the Central Bank of Nigeria’s Monetary Policy Committee.

The Naira appreciated to 306 naira 33 kobo against the Dollar on Wednesday and 416 naira 19 kobo to the Pound but weakened to 365 naira 38 kobo against the Euro on the interbank platform.

At the parallel market the local unit also firmed to 423 to the Dollar and 550 to the British Pound while it traded flat at 470 to the Euro.

Financial Markets Close Due To Eid-el-Kabir Celebrations

Naira, dollar, Market FX market, Financial marketsFinancial markets across the country closed on Monday and Tuesday this week to commemorate the Eid-el-Kabir holiday.

Meanwhile, at the equities market last week, the Nigerian equities market finished bearish, with the all share index tumbling by 0.65 percent, to 27,577.52.

Total volume traded increased by 6.08 percent to 1.18 billion shares, valued at 10.3 billion Naira, and traded in 16,522 deals.

At the average, Interbank rate climbed by 237 basis points this week, to close at 20.29%.

The CBN conducted multiple OMO auctions totaling, 246 billion Naira, which nearly matched inflows of 293 billion Naira, from maturing OMO bills.

Analysts expect rates to continue to tighten, with no major inflows set to come in, this week.

FX Market: Naira May Trade At N350 To Dollar

Naira, Market, dollarThe Nigerian currency is expected to trade around 350 Naira to the dollar in the coming days as uncertainty over the implementation of the Central Bank of Nigeria’s planned new flexible exchange rate policy persists.

A meeting between the CBN Governor and local currency traders over the policy has failed to yield desired results.

Dealers say the financial market dealers association initiated the meeting with Mr Godwin Emefiele to discuss the policy which seeks to abandon the naira’s 15-month peg to the dollar.

The CBN says it would issue the guidelines for the flexible exchange rate policy at the appropriate time.

The local currency retreated to 350 to the dollar on the parallel market on Thursday from 360 Naira to the dollar last week.

Buhari Rejects Call By IMF To Lift Foreign Exchange Ban

Muhammadu-Buhari-on-north-east-StarvationPresident Muhammadu Buhari has once again rejected calls by the International Monetary Fund (IMF) to lift the foreign exchange ban and allow a more flexible rate for the Naira.

Speaking in an interview on a Pan-Arab Television, President Buhari said hard currency curbs were necessary, as Nigeria could no longer afford to import as much as it did in the past due to the falling oil revenues.

In February, the IMF called on Nigeria to lift the restrictions imposed by the Central Bank last year and let the Naira reflect “market forces” more closely, as the restrictions had significantly affected the private sector.

The Naira trades on the Dollar at the secondary market 40 per cent below the official rate as the Central Bank has limited access to hard currencies in order to preserve its falling Forex reserves.

InterBank Forex Market: Naira Ends 1.6 Per Cent Lower Against Dollar

naira-notesThe naira shed 1.64 percent to close at N189.10 against the greenback on Thursday, despite dollar sales by the central bank and oil companies, dealers said.

The naira traded at around N191 on Thursday, prompting the Central Bank of Nigeria (CBN) to intervene, which helped lift it to 185.20. But it then finished weaker compared with its close of 186 on Wednesday after demand surged.

One dealer traded the naira at a one-off rate of 194.10 during the midday session.

Dealers said Royal Dutch Shell had sold an undisclosed amount of dollars on Thursday, adding that liquidity from state oil company NNPC’s $350 million sale on Wednesday was still in the market.

Emefiele Rules Out Floating Naira To Avoid Depreciation

Godwin_Emefiele_CBN_Governor2The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said on Tuesday that he would not allow the naira to float freely because it would lead to “major” depreciation of the currency.

A weaker currency would affect the purchasing power and economy of Nigeria, he told a business conference in Lagos.

The naira has been under pressure from a fall in the price of oil, Nigeria’s main export.

This forced the CBN to devalue the currency by 8 percent in November to save its foreign reserves, after several months of defending it.

The naira closed at 192.10, a new record low against the U.S. dollar on Tuesday, compared with Monday’s record low close of 191.10.

“We cannot allow price (of the dollar) to just sky rocket simply in the name of demand and supply, that’s why what we do … is run a managed float where there’s a particular limit (at which) we intervene to keep price of foreign exchange within a moderated level,” Emefiele said.

Emefiele added that the CBN would continue to see how best to moderate naira pressures, noting that Nigeria imports almost everything it consumes — even “toothpicks, fish and rice” — which ruled out allowing the naira to float.

“If we do … it will lead to major depreciation of the currency. It will lead to high prices … the purchasing power of our people will decline … (and it) will begin to hurt the economy.”

The CBN Governor told the conference that the Central Bank had intensified its vigilance in the forex market in order to curb speculation and also to determine when to intervene.

Naira Down 1.2 Pct Despite CBN Dollar Sale

Money_newThe naira fell 1.2 percent to close at 185.60 to the greenback on Thursday, despite the Central Bank of Nigeria intervening with dollar sales to try to prop up the currency, dealers said.

The unit opened at 183.40 naira to the greenback, the same level it closed at the previous day. But quickly weakened to an intraday low of 186.30 naira in thin trade, prompting the central bank to intervene, dealers said.

The bank on Thursday asked 21 commercial lenders to bid for $500,000 each, in an intervention move aimed at providing liquidity to the interbank market and supporting the naira, which has been hard hit by falling global oil prices.

“I think central bank will try to control any uptrend in the currency, to provide liquidity to the market. But for how long is the question,” one dealer said.

The Central Bank was forced to devalued the naira two months ago to halt the slides in its foreign reserves, after the country’s main export commodity plunged. The bank devalued the naira by 8 percent and tightened trading rules to try to curb speculation against the currency.

But the naira has traded well outside its devalued band of 160-176 – and reserves are still falling.

Nigeria’s foreign exchange reserves on Jan. 13 were down 3.2 percent month-on-month from December to $34.51 billion by Jan. 13 because of draw downs to defend the naira, central bank data showed.

At a separate dollar sale, the central bank sold $249 million to lenders at 168 naira at its twice-weekly forex auction on Wednesday to help meet demand for the greenback, higher than the $200 million it earlier offered.

Naira Gains After Central Bank Dollar Intervention

Money_newThe Nigerian naira firmed 0.12 percent to close at 163.70 against the dollar on Monday, after the Central Bank sold dollars directly to lenders on the interbank market to prop up the ailing currency, a dealer said.

The local unit eased to around 164.15 naira by midday trade, prompting the central bank to intervene with an undisclosed amount of dollars sold directly on the interbank market, dealers said.

The naira closed at 163.90 on Friday.

The currency has been falling for the past three weeks, weakened by the impact of the decline in global oil prices and low offshore inflows into Nigeria’s debt and equity markets.

“We expect the central bank to continue to support … and reduce pressure on the naira,” one dealer said.

At a foreign exchange auction on Monday, the central bank hiked the amount of dollars it offered to sell to $500 million, up from $350 million it has offered in the past quarter.

Dealers attributed the increase in amount sold by the central bank at the twice-weekly auction on Monday to the public holiday declared this Wednesday to mark Nigeria’s independence day celebrations.

Naira Falls To 7-Week Low On Strong Dollar Demand

Money_new_NairaThe Naira fell 0.28 percent against the dollar on Tuesday to its weakest level in seven weeks, hit by strong demand from foreign exchange users and a squeeze in availability of the U.S. currency.

The local unit closed at 162.80 to the dollar, compared with Monday’s close of 162.35.

“We saw a bit of demand in the market today, pushing down the naira value,” one dealer said.

“Dollar flows have been scanty after many of the oil companies concluded their month-end dollar sales early last week,” another dealer said.

The naira eased against the dollar last week after some importers brought forward their forex requirements to tap into the month-end liquidity boost provided by oil companies selling the greenback to meet their local obligations.

Dealers said the naira should trade within range for the rest of the week in the expectation that state-owned energy company NNPC will sell dollars in the market soon.

NNPC accounts for the bulk of dollars traded on the interbank market and usually sells dollars to some lenders once or twice every month.