The naira faced depreciation in the mid-week trading session on the peer-to-peer market and further weakened on the black/official market, despite growing expectations that the United States central bank had concluded its interest rate hikes, leading to the dollar hitting a three-month low.
Official data from FMDQ revealed that the naira lost value on Tuesday, trading at N881.88/$1, down from N814.60/$1 on Monday.
Similarly, on the black market, the naira’s value fell to N1160/$1 on Tuesday, compared to N1,115/$1 on Monday.
Despite assurances from Mr. Yemi Cardoso about the Central Bank of Nigeria (CBN) implementing new policies for exchange rate stability, short sellers of the naira held their positions.
Mr. Cardoso emphasized the importance of clear, transparent, and harmonized rules for market operations, stating that extensive consultations with banks and FX market operators would precede the implementation of new foreign exchange guidelines and legislation.
The dollar index and dollar index futures experienced a slight decline during the London trading session, following overnight losses after reaching three-month lows earlier in the week.
This decline in the dollar was attributed to growing speculation that the U.S. Federal Reserve would cease interest rate hikes and potentially initiate cuts in 2024.
The Fed has maintained its benchmark interest rate at a 22-year high since July, and while it is expected to maintain the current rate in its December meeting, experts anticipate ongoing economic growth supporting progress on inflation.
Recent data indicates a decline in consumer spending, business activity, and labor demand in the U.S.
Chicago Fed President Austan Goolsbee’s comments expressing concerns about maintaining rates too high for too long further reinforced dovish expectations regarding the Fed’s stance.
Financial markets are currently awaiting more economic signals to determine when the Fed might start easing policy.
The decline in U.S. government debt’s 10-year yield on Tuesday is seen as an indication that the market is responding to expectations of a more accommodative Fed stance.