U.S dollar set to register its fourth consecutive monthly decline, longest losing streak since 2017
The US dollar is weaker as traders placed a very dovish spin of the Fed shift to inflation targeting.
The US dollar is set to register its fourth consecutive monthly decline on Monday, its longest losing streak since mid-2017. This slide was triggered by strengthened geopolitical risks and the recent strategy by the U.S Federal Reserve in allowing high inflation.
What we know: The U.S. Dollar Index, which tracks the greenback against a list of other major currencies, down by 0.08% to trade at 92.308 at the time of this report.
The latest speech by Federal Reserve Chair, Jerome Powell revealed an accommodative shift in the central bank’s approach to inflation increasing pressure on the U.S dollar as global investors interpreted it that U.S interest rates could stay lower for a longer period of time.
Quick fact: The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound sterling, Swedish Krona, Euro, etc. Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, would need to pay more dollars in fulfilling such payment obligations.
Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Themoneymetrics discussed the present macros, that has made the U.S dollar, retain its bearish trend relatively. He said;
“The US dollar is weaker as traders placed a very dovish spin of the Fed shift to inflation targeting. Surprisingly on Friday, the giant swing lower occurred in Asia, suggesting USD bearish positioning in Asia was lighter, and so with the Jackson hole “event” out of the way, the USD selling resumed.
“Inflation in the Fed’s preferred measure has averaged only 1.5% over the last decade, and high unemployment should keep price pressures relatively low over the near-term, triggering the USD sell signal. This, despite the key dollar sell signals not flashing as US real yields rose, so it is likely the lower for a longer narrative that is music to the dollar bears ears.”
CBN postpones the launch of eNaira
The much-anticipated launch of Nigeria’s Central Bank Digital Currency dubbed eNaira has been postponed by the Central Bank of Nigeria (CBN).
The postponement was announced in Abuja today, by Mr Osita Nwanisobi, the apex bank’s Director of Corporate Communications. Nwanisobi stated that the CBN took the decision to postpone the launch, which had been initially planned to coincide with the Independence Day anniversary, in consideration of other activities lined up to commemorate the day.
The postponement also comes in the wake of a cease and desist notification sent to the Central Bank of Nigeria (CBN) concerning the use of the name “eNaira.” According to a document seen by Nairametrics titled: “Infringement of Trademark & Violation of Corporate Name cease and desist Notification to the Central Bank of Nigeria,” the notice was signed by Olakunle Agbebi Esq for Olakunle Agbebi & Co .
“The CBN took the decision to postpone the launch, which had been initially planned to coincide with the Independence anniversary, in deference to the mood of national rededication to the collective dream of One Nigeria,” Nwanisobi noted in a statement.
Assuring that there is no cause for concern, he stated that the CBN and other partners are dedicated to ensuring a smooth process that benefits customers in general, particularly those in rural regions and the unbanked.
On the eNaira’s advantages, Nwanisobi stated that Nigerians will be able to send money to each other’s eNaira wallets as well as pay for goods and services at selected merchants.
He went on to say that the eNaira will limit the use of currency and ensure the Nigerian economy’s stability.
In response to questions about banks, financial institutions, and other financial ecosystem stakeholders’ readiness for the introduction of the eNaira, he reaffirmed that the digital currency is a journey and that not all bank customers will be able to transact on the day of its debut.
Meanwhile… a lawsuit looms
It’s not clear if the postponement is related to the lawsuit but it was reported that a cease and desist notification has been sent to the Central Bank of Nigeria (CBN) concerning the use of the name “eNaira.”
“For this reasons, our client has approached the Federal High Court in Suit No: FHC/AB/CS/113/2021 between ENAIRA PAYMENT SOLUTIONS LIMITED vs CENTRAL BANK OF NIGERIA to seek a restraining order including an order to restrain CBN from proceeding in the launch on 1st October 2021,” the Notice stated, adding that in the interim, the CBN was being warned to cease and desist from using or purporting to use the name eNaira for its product or in any other way.
The apex bank is yet to respond publicly to the lawsuit.
CBN forex policy: BDCs decry job cuts, could lose N300 billion capital
The Central Bank of Nigeria’s policy on the discontinuation of sales of forex to Bureau de Change Operators has consequently resulted in massive job losses in several thousands of both direct and indirect employment in the sector with a possible capitalisation fade out of N300 billion if the status quo continues.
This was disclosed by the President, Association of Bureau de Change Operators of Nigeria, ABCON, Alhaji Aminu Gwadabe, according to PUNCH.
Based on the last Monetary Policy meeting the CBN Governor made it clear that there would be no reversal in the apex bank’s policy. However, the lucrative business of the BDCs has been battling for survival.
What ABCON President is saying?
The CBN’s ban on sales to BDCs has greatly affected the business of the forex operators, leading to the laying off of workers, as admitted by the ABCON president.
Gwadabe said, “The majority of the licensed BDCs are in dire zero of supply sources since the CBN policy on the discontinuation of sales of forex with the attendant consequences of job losses in several thousands of both direct and indirect employment with a capitalisation value of N300bn to fade away.
“This is indeed worrisome and the reason for the consistent advocacy of ABCON for CBN to include BDCs in remittances.”
The CBN was supplying $10,000 to each BDC twice a week before the forex supply cut.
The CBN declared its decision after expressing disappointment that the BDCs had defeated their purpose of existence to provide forex to retail users, but instead, had become wholesale and illegal dealers.
Speaking on why the CBN should consider the BDCs as diaspora remittance agents, Gwadabe said, “Considering the BDCs potent notable roles in exchange rate management stability in 2006, 2017, 2020 and liquidity vehicles in the market, I think the CBN should review and consider BDCs becoming payout agents of International Money Transfer Services Operators in the remittance space as contained in their guideline of 2014 for BDCs reforms.
“The BDCs have over 15 years been strong allies of the CBN and effective in ensuring forex liquidity and price stabilisation discoveries.
“Excluding the BDCs from the payment agents of remittance companies in the remittance space and the reallocation of their supply is like throwing the baby with the bathwater or excluding the man who owns water tanker that supply water in the street from owning a water business.”
He added, “The BDCs in Bangladesh, India, Lebanon, Kenya play active roles in payout agencies. Therefore, Nigeria should not be an exception.”
Gwadabe disclosed that ABCON had introduced innovations and platforms embraced by its members like SAAs master for rendering returns online real-time to CBN by the BDCs.
According to him, ABCON has also on-boarded BDCs on the Nigerian Interbank Settlement systems for BVN verifications.
He said that the BDCs were also on board of the Nigerian financial intelligent platform for rendering suspicious and cash transfers transactions.
Naira depreciates at official window despite a 266% increase in dollar supply
Wednesday, 29th September 2021: The exchange rate between the naira and the US dollar closed at N414.73/$1, at the official Investors and Exporters window.
Naira depreciated against the US dollar on Wednesday, to close at N414.73/$1, representing a 0.06% drop when compared to N414.50/$1 recorded on Tuesday 28th September 2021.
Meanwhile, the exchange rate at the parallel market closed at N574/$1 on Tuesday. This is according to information obtained from BDC operators in Lagos.
The naira fell at the official market despite a massive 266.2% increase in dollar supply. The local currency is still hitting record lows against the US dollar at the black market despite the news of Nigeria’s Eurobond sales which is meant to boost the nation’s external reserves.
Nigeria, last week, sold $4 billion Eurobond after investors oversubscribed to the tune of $12.2 billion with the country’s external reserve rising by $2.3 billion in the month of September.
The rise in the external reserve on the back of the Eurobond issue is likely to increase the CBN’s capacity to support the naira.
Trading at the official NAFEX window
The exchange rate depreciated against the US dollar on Wednesday, 29th September 2021 to close the day at N414.73 to a dollar, representing a 23 kobo drop when compared to N413.50/$1 recorded on Tuesday, 28th September 2021.
The opening indicative rate closed at N414.05/$1 on Wednesday, representing a 36 kobo drop when compared to N413.69/$1 recorded on Tuesday, 28th September 2021.
An exchange rate of N415.20 to a dollar was the highest rate recorded during intra-day trading before it settled at N414.73/$1, while it sold for as low as N404/$1 during intra-day trading, the same as the previous day.
Meanwhile, forex turnover at the official window rose by 266.2% on Wednesday, 29th September 2021.
According to data tracked from the FMDQ, forex turnover increased significantly from $127.68 million recorded on Tuesday to $467.56 million on Wednesday 29th September 2021.
The world’s largest and most popular cryptocurrency, Bitcoin, was up by 3.35% to trade at $43,542.20 as major cryptocurrencies show signs of recovery over the last 24 hours since the ban of crypto trading by the Chinese government.
Data from CoinMarketCap revealed that the market dominance of Bitcoin was earlier on Wednesday 42.65% with an increase of 0.13% over the course of the day. Over the course of the week, Bitcoin showed a 1% increase.
The global crypto market capitalization on Wednesday stood at $1.87 trillion and it showed that it had slipped by 0.91% over the course of the last day. The total crypto market volume over the last 24 hours was $93.56 billion, which indicated that there had been a decrease of 3.88% over the same time period according to information from CoinMarketCap.
The second-largest cryptocurrency by market capitalization, Ethereum, was up by 3.83% to trade at $3,031.61, while XRP was also up by 4.18% to trade at $0.958.
Crude oil price
Oil prices dropped as Brent oil dipped by 0.57% on Wednesday to trade at $78.64 per barrel as US dollar rose and after the United States government report showed crude stockpiles rose for the first time in 8 weeks.
Crude oil moved lower today after the Energy Information Administration (EIA) reported an inventory build of 4.6 million barrels for the week to September 24.
This compared with a draw of 3.5 million barrels for the previous week and analyst expectations of a 2.33-million-barrel draw.
A day earlier, the American Petroleum Institute reported an unexpected inventory build of 4.13 million barrels, which took some steam out of an oil price rally that pushed Brent crude over $80 a barrel—a three-year high.
The rally was sparked by a gas and coal crunch that caused worry about energy supplies during the northern hemisphere winter when demand is at its highest.
WTI dropped by 0.19% to trade at $74.69 per barrel, Natural Gas was down by 1.99% to trade at $5,368. The OPEC Basket rose by 0.82% to trade at $78.37 per barrel, while Nigeria’s crude, Bonny Light dropped by 0.88% to trade at $77.53 per barrel.
Nigeria’s foreign reserve gained further by $152 million on Tuesday, 28th September 2021 to close at $36.413 billion compared to $36.261 billion recorded as of the previous day. The latest increase represents a 0.42% boost in the country’s foreign reserve and the highest level since February of the year.
The reserve has now gained $2.324 billion in the month of September 2021, while the recent gain puts the year-to-date gain at $1.038.77 billion.
The recent increase in the reserve position, which has continued since the 25th of August is in line with recent reports suggesting that Nigeria’s foreign reserve position could grow as high as $40 billion by the end of September 2021.
Although, hitting $40 billion seems unlikely but it’s a major step in the right direction especially with the oversubscription of the $4 billion Eurobond sourced by the federal government from the international debt market