Naira trading at lowest level since late February amid falling US Dollar Index

Image credit: Nairametrics

The naira traded at its lowest level in the official market even as the US dollar index fell to a three-week low ahead of the US jobs data.

In the official market, the naira lost ground against the US dollar on Thursday, surpassing 1,400 naira against the safe-haven currency.

The naira fell by about 1%, from N1,390 reported at the close of trading on Tuesday, according to data from the FMDQ stock exchange. Wednesday was a holiday.

The intraday high on the Nigerian Autonomous Foreign Exchange Market closed at 1,445 naira on Thursday, up from 1,450 naira on Tuesday. Furthermore, the intraday low fell from N1,200 on Tuesday to N1,299 on Thursday.

The dollar index, which gauges the dollar’s strength against six major currencies, fell to its lowest position since April 11 at around 105.2 index points. It fell about 1% this week, putting it on track to post its biggest weekly loss in nearly two months.

The Nigerian naira has failed to take advantage of the falling dollar index as the index remained near its three-week low after Federal Reserve Chairman Jerome Powell ruled out the likelihood of a rate hike. interest during the FOMC meeting.

As anticipated, the Federal Reserve left interest rates unchanged at the end of its two-day meeting to discuss monetary policy on Wednesday.

However, the rigid levels of inflation in the United States continue to worry federal officials, who are foregoing premature reductions in official interest rates.

Investors now await the April nonfarm payrolls report due later in the day to see if the Federal Reserve will change its stance on interest rates.

Lower safe-haven demand for the dollar due to easing geopolitical tensions in the Middle East is expected to cause the currency to fall below the 105 level.

After Federal Reserve Chair Powell told reporters that interest rates may need to stay high for longer but rejected the idea of ​​raising them again, traders are now focusing on nonfarm payrolls data from USA, whose publication is scheduled for today.

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US Dollar Index Outlook

Currency traders are now interested in the April jobs report, where healthy growth of 240,000 non-farm jobs is anticipated. Strong labor market data and a gradual tightening of monetary policy should give the DXY bullish momentum in the near term, given current economic indications and the Federal Reserve’s strategic positioning. However, the prevailing attitude is cautiously positive because monetary stability is still in danger due to inflation and political reactions.

According to JP Morgan, strong US labor market and inflation data demonstrate how durable the US economy has proven to be. This is due to the forecast of less easing by the Federal Reserve (Fed) this year, which should maintain the strength of the currency for the rest of the year, which is why the dollar has reached all-time highs.

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