“USD Soars to 10-Month High Against Euro and British Pound, Naira Hits Record Low on Black Market”

On Thursday, the dollar maintained its position at a 10-month peak against a basket of significant currencies, including the Euro, British pound, Japanese Yen, Swedish Krona, Swiss Franc, and Canadian dollar. Concurrently, the Naira hit an unprecedented low on the black market. This surge in the dollar’s strength was driven by investors analyzing encouraging economic data from the United States, along with fresh statements from Federal Reserve officials.

The Nigerian Naira experienced a historic decline on the black market, surpassing a rate of 1,000 Naira to the dollar. This depreciation was largely attributed to speculative demand as individuals sought the dollar as a store of value.

In recent weeks, the Naira’s decline in the black market has been exacerbated by speculative activities and heightened demand, shifting these pressures away from the official market, where currency exchange restrictions were eased in June. Notably, the Central Bank of Nigeria has been notably absent in its interventions, leading businesses and individuals to source currency supplies from the black market—a market that remains persistently short of foreign currency.

Finance Minister Wale Edun cited the central bank’s $6.8 billion debt in the foreign exchange market as a primary factor in the currency’s weakness. The newly appointed CBN chief, Mr. Yemi Cardoso, has expressed his immediate commitment to addressing this backlog.

Government officials are actively working to attract liquidity from foreign investors who have hesitated to invest in Nigeria. The proposed oil-for-dollar loan program, which would have injected $3 billion into the state oil company from the African Export-Import Bank (Afrexim), has yet to materialize.

As a result, the US dollar index, measuring the dollar against a basket of major currencies, currently stands at 106.70, hovering near its overnight peak of 106.84—its highest level since November 30th.

While the dollar maintains its strength, the Euro and Sterling face challenges in recovering from recent multi-month lows. Hawkish comments from Federal Reserve officials, combined with the prospect of an interest rate hike, $134 billion in new government debt sales, and concerns about a US government shutdown, have raised apprehension among investors in the stock market.

The movement of global stock indexes below key technical support levels during a seasonally weaker period of the year suggests the possibility of further declines. The rapid increase in rates has significantly impacted new home sales in the United States, causing their most substantial drop in 11 months.

Federal Reserve Bank President Neel Kashkari and other Fed spokespersons have issued warnings about the potential for additional interest rate hikes, citing ongoing economic strength as a determining factor for further tightening.

Fed Chairman Jerome Powell is expected to provide further insights into the future direction of US monetary policy in his upcoming speech. Additionally, the market will closely scrutinize Australian retail sales data, set to be released later today.

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