Following the conclusion of the Monetary Policy Committee (MPC) meeting, the naira started trading in a narrow range on Thursday. Meanwhile, the Federal Reserve’s minutes strengthened the currency’s status as a safe haven despite mounting worries about higher-for-longer interest rates.
On Wednesday, the official foreign exchange (FX) market saw no movement of the local currency against the US dollar, one day after the CBN increased its benchmark interest rate by 150 basis points to 26.25%.
The dollar was quoted at N1,462.59 on Wednesday, according to statistics from the FMDQ Securities Exchange Limited. This represents a minor increase in the value of the naira by 0.21% when compared to the price of N1,465.68 on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
However, the naira weakened slightly against the dollar on Wednesday, losing about 1% on the black market. The naira was quoted at N1,475 per dollar on Wednesday evening.
Read Also: Amid Inflation, CBN Raises Interest Rate To 26.25 %
Following a two-day meeting of the Monetary Policy Committee (MPC) on Tuesday, Nigeria’s apex bank maintained the asymmetric corridor around the monetary policy rate (MPR) at +100/-300, the commercial banks’ cash reserve ratio (CRR) at 45.00%, and the liquidity ratio at 30.00%.
Consequently, the CBN directed all Bureaux De Change Operators to reapply for licenses, primarily to strengthen the integrity of the nation’s foreign exchange market,
The apex bank revealed this on Wednesday in a statement approved by Haruna Mustapha, Director of Financial Policy and Regulations.
In a recent directive to BDC operators, the CBN stated, “All Existing BDCs shall re-apply for a new license according to any tiers or license category of their choice as provided in the guidelines.”
Data from the FMDQ revealed that the intraday high closed at N1,531 per dollar on Wednesday, stronger than the N1,549/$1 finish on Tuesday, indicating that market fundamentals still reflect substantial intraday volatility.
Read Also: Naira Drops Below 1500/$ While CBN Interest Rate Decisions Awaits
The greenback remains elevated as Fed minutes heighten concerns about interest rates
The dollar index and dollar index futures both steadied in the London trading session following significant overnight advances. The dollar increased and reached a one-week high in trade,
The Fed meeting minutes in late April revealed that some Fed officials were prepared to hike interest rates further to reduce inflation, and policymakers were becoming increasingly concerned about sticky inflation.
A series of separate speeches from Fed officials suggesting sticky inflation would probably postpone any possible rate decreases came before the minutes.
Even if it is still thought that the Fed won’t raise interest rates much more, markets are now pricing in a higher likelihood that the central bank will maintain high rates for an extended time, which is bad news for risk-averse Asian markets.
