U.S dollar set for first weekly fall in 2024 while naira shows momentum

Naira Gains 9.3% At Parallel Market (See New Rate)
Naira vs Dollar

U.S. Dollar Sees First Weekly Dip in 2024, Naira Gains Momentum.


In the latest currency market movements, the U.S. dollar index is poised for its inaugural weekly decline of the year, while the Nigerian naira exhibits strength in both official and parallel markets.

The naira showed resilience, advancing to N1,595 against the dollar in Nigeria’s official Foreign Exchange Market on Thursday, reflecting a positive trend. Data sourced from FMDQ indicates a decline in the indicative exchange rate for NAFEM from N1,609.51 per dollar on Wednesday to N1,595.11 on Thursday.

Similarly, in the parallel market, the naira’s value climbed from N1,610 per dollar on Wednesday to N1,490 per dollar, marking a notable increase. It’s worth noting that this uptick occurred prior to the recent foreign exchange guidelines issued by the Central Bank of Nigeria (CBN).

Investors took a pause from acquiring the dollar after an almost two-month rally, driven by expectations of a delayed Federal Reserve rate cut. The revised forecast suggests the first Fed rate decrease might occur in June, as opposed to May, with a reduced expectation of the magnitude of rate cuts.

Market dynamics indicate a shift from initial projections of up to seven 25-basis point cuts in 2024 to a more conservative estimate, aligning more closely with the Fed’s anticipation of three cuts. There’s also speculation that weakening economic indicators might influence market sentiment.

Despite encouraging data on inflation and the labor market in January, sentiments from New York Fed President John Williams hint at a potential interest rate reduction “later this year.” The upcoming Personal Consumption Expenditures (PCE) report is anticipated to offer further insights into Fed policy.

READ ALSO: 10 Fastest Growing Sectors of the Nigerian Economy in 2023

The dollar index remained relatively stable at 103.93 on Friday, signaling a marginal change from the previous day and setting course for a weekly decline of 0.34%. While it’s below the recent three-month high, recorded on February 14 at 104.97, it has rebounded from a five-month low observed on December 28 at 100.61.

Amidst an economy demonstrating strength and the Fed’s cautious approach towards early rate cuts in its efforts to stabilize inflation around the 2% target, the dollar has sustained an upward trajectory this year. Investors now await forthcoming economic indicators for fresh perspectives on monetary policy.

Bank of America projects a 1.15 appreciation of the euro against the dollar by year-end, reflecting an evolving risk appetite that has propelled stock markets to record highs globally. This shift in sentiment might contribute to reduced demand for the U.S. dollar, traditionally considered a safe-haven currency.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.