Naira Resists Dollar At N1,170/$ As US Fed’s Decision Looms

The Nigerian naira has crossed the black market threshold, settling at N1,170 against the US dollar in the midst of economic challenges and geopolitical turmoil.

The ongoing struggles in Eastern Europe since February 2022 have cast a shadow on the country’s economy, contributing to the shortage of dollars in central bank reserves and pushing the naira past the N1,000/$ mark on the black market.

In response to the currency crisis, the Central Bank of Nigeria (CBN) has taken unconventional steps to stabilize the naira’s exchange rate.

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Reports of the Federal Government’s plans to digitize forex transactions and discourage speculative demand and cash hoarding have prompted currency traders to rethink their strategies.

Amid these challenges, Nigeria’s main source of dollar revenue, oil sales, is dwindling due to production constraints and geopolitical conflicts, further fueling the demand for the US dollar.

Investors seek refuge in safe-haven currencies during times of heightened uncertainty, anticipating a surge in the dollar’s demand.

As the US Federal Reserve prepares to announce its interest rate decision, market speculators anticipate stability in policy rates.

However, Federal Reserves Chairman Powell’s comments about the policy outlook and the language in the statement may inject volatility into the financial markets.

While the US dollar has been on the rise, its future strength remains uncertain, with factors like rising government debt yields and market dynamics coming into play.

As interest rate differentials change, there is potential for the naira to strengthen against the dollar, but the overall impact remains uncertain due to Treasury yields and the hawkish stance of the Federal Reserve.