On Tuesday, the naira appreciated against the safe-haven currency, trading at the official foreign exchange market on October 8, 2024, at N1561.76/$1, a notable improvement from N1635/$1 at the beginning of the week, according to data from the Nigerian Autonomous Foreign Exchange Market.
This reflects an appreciation of N73.4/$ within a single day at the NAFEM market.
Nevertheless, the naira was unable to regain the N1650/$ range in the black market, closing at N1,680/$1 on Tuesday. The Nigerian federal government announced the commencement of crude oil and other processed product sales in naira, a move anticipated to bolster the local currency's value.
Mr. Wale Edun, the Coordinating Minister for the Economy and Minister of Finance, revealed that the sale of refined petroleum products and crude oil in naira officially began on October 1, 2024, following a directive from the Federal Executive Council.
“The initiation of this strategic program was confirmed by key stakeholders after a meeting of the Implementation Committee, chaired by the Minister of Finance on October 3, 2024, to review the post-launch status of the Naira Crude Oil and Refined Products Initiative,” the statement indicated.
This week’s limited U.S. economic data calendar provides a pause following last Friday’s strong jobs report, which propelled the dollar upward and led investors to lower their forecasts for potential interest rate cuts.
The dollar recently experienced its best week in two years, highlighting the risks associated with betting against it, especially as other nations aim to maintain its strength. The DXY index, which measures the dollar against major global currencies, increased by over 2% last week. This was a surprising turn of events, particularly for traders who had taken short positions on the dollar, anticipating a decline.
The surge in the dollar can be attributed to the impressive U.S. employment figures and the subsequent reassessment of the Federal Reserve’s interest rate path. However, the dollar's recovery had already begun prior to Friday’s report; the payroll data simply added to the momentum.
Central banks in Europe and Japan have indicated that any actions by the Fed to hasten rate cuts would be met with similar responses, which has been a key factor in the dollar's recent strength. The Fed's significant 50-basis-point cut last month, part of what it described as a 250-basis-point easing cycle, has certainly caught the attention of global central bankers.
Later on Wednesday, investors will have the opportunity to review the minutes from the Federal Reserve’s September meeting. These minutes will reflect discussions regarding the labor market, which had shown signs of weakening at that time. Ultimately, all but one policymaker supported a 50-basis-point reduction.
However, in light of the robust nonfarm payroll report, market expectations for an imminent Fed rate cut have shifted. The CME FedWatch tool now indicates that investors assign approximately an 85% probability to a quarter-basis-point cut, with a slight chance that the Fed may opt to maintain current rates.
The pound remained stable at $1.3099, close to its three-week low of $1.30595 recorded on Monday. Meanwhile, the euro declined by 0.07% to $1.0973.