The naira opened the 2024 year on a negative note on Tuesday settling at N988.46/$1 at the Nigeria Autonomous Foreign Exchange Market (NAFEM), compared to N907.11/$1 quoted on Friday, the last trading day of 2023.
According to statistics from the FMDQ, the FX market recorded low dollar liquidity as the daily market turnover declined by 82.78% to $15.38 million on Tuesday, the first trading in 2024 from $89.30 million recorded on Friday, the last trading day of last year.
Market analysts anticipate that the naira’s rate of recovery will be determined by how soon and reliably confidence is restored, not by the marketing gimmick of the FG.
However, the latest FX pricing of the local currency shows a significant reversal in risk sentiment in global financial markets.
It would be recalled that the African Export-Import Bank (Afreximbank) recently injected $2.25 billion to alleviate the nation’s FX crisis but the funding appeared to have little effect as the local currency opened the official trading year on a sluggish note.
An analysis of the global investment markets showed that the US dollar maintained most of its New Year gains on Wednesday morning as it stayed near a two-week high, due to a combination of positive factors, including elevated U.S. Treasury yields and a cautious turn in risk sentiment that weighed on Wall Street.
A day earlier, the greenback index had rallied by nearly 1%, marking its best daily performance since March 2023.
The Federal Reserve’s dovish stance during its policy meeting in December of last year, which increased betting on U.S. rate reduction in 2024, caused a spike in risk appetite at the end of the year that devalued the dollar and spurred a rise in treasuries and stocks.
However, the Euro and Pound Sterling recorded significant losses after recording their worst daily performance in months on Tuesday.
The USD gained strength on Tuesday as trading conditions returned to normal, and the yield on the benchmark 10-year US Treasury note increased toward 4%.
Analysts believe that busy week lies ahead for FX traders due to sundry economic data that will affect the markets, such as European inflation data and U.S. data on job openings and non-farm payrolls, amongst others.
The release of the minutes from the Federal Open Market Committee’s December meeting on Wednesday, which sets interest rates, is expected to give further insights to the central bankers’ perspectives on the possibility of an interest rate reduction.
