The parallel market for foreign exchange in Nigeria is experiencing another decline of the national currency, with forex traders selling the US dollar at N1,050, indicating ongoing pressure due to high demand.
This persistent trend has led to the naira’s devaluation of more than 40 percent against the US dollar since the mid-June devaluation.
While government measures were introduced with the aim of strengthening the country’s financial and foreign accounts, they have had only a short-lived impact on inflation.
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In addition, the US dollar index, which measures the US currency against six other major currencies, stands at 105.64, not far from its lowest point since September 25, which was 105.55.
The US dollar remains relatively stable but is hovering near a two-week low.
This trend comes after the release of minutes from the Federal Reserve’s latest meeting, where policymakers took a cautious stance. Investors are now eagerly awaiting important data on US inflation.
According to the released minutes, Federal Reserve officials stressed the need for careful consideration of how much additional policy tightening may be necessary.
Factors such as economic uncertainties, oil prices, and financial market conditions have influenced this stance. Rising bond rates have also been discussed as a potential factor that could influence the decision to stop the rate-hike cycle.
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The CME FedWatch tool, which tracks futures markets, indicates a 26 percent likelihood of a 25-basis point hike at the December meeting and a nine percent chance of a similar hike at the November meeting.
The recent weakness of the US dollar is largely attributed to falling Treasury yields, as bond prices have risen following the Federal Reserve’s more accommodative stance on future interest rate hikes.
Recall that the parallel market breached the N1,000/$1 threshold in September, initially viewed as a temporary occurrence by some analysts.
However, the ongoing inability to attract sufficient forex inflows has resulted in the continuous depreciation of the exchange rate.