While market participants awaited the release of America’s inflation data and the U.S. Federal Reserve’s interest rate decision later in the day, the naira saw some gains versus the dollar as the dollar index calmed slightly.
Price action indicates that naira bulls have been successful in maintaining the value of the naira around the N1500/$ border as worries in the nation’s FX market were allayed by an increase in the CBN’s FX reserves.
According to FMDQ statistics, the BDC rate increased by 0.14% on Tuesday from N1,477/$ to N1,475/$, while the local currency gained 0.02% from N1,481.32/$ to N1,481.03/$ in the official market.
CBN’s data shows that Nigeria’s foreign reserves balance stood at $32.7 billion amid a recent boost from external sources despite Nigeria’s tepid oil output.
The FG received $925 million from the African Export-Import Bank (Afreximbank) as part of the $3.3 billion crude oil-backed prepayment loan deal with the Nigerian National Petroleum Company (NNPC) Limited, which caused the increase in Nigeria’s reserves.
The U.S. Federal Reserve might decide to postpone its scheduled interest rate decreases until later in the year due to higher-than-expected inflation. This could hinder foreign investment inflows into Nigeria and depreciate the naira’s value.
The yields on U.S. government bonds are near an all-time high, causing global investors, who would normally be less willing to take a chance on developing market bonds, to play it safe and show less interest in Nigeria’s capital market.
The dollar index, which compares the value of the US dollar to a few other major currencies, was down a little more than 28 basis points, trading below the 105 index point threshold overnight after hitting its highest level since May 14 at 105.46 index points.
