Attractive U.S yields add pressure on Nigerian naira

Overnight, the benchmark 10-year Treasury yield increased by about 14 basis points to 4.479%.

Market sentiments attributed this increase to the growing probability that Donald Trump will win the presidency of the United States, which would likely result in increased tariffs and government borrowing.

The Nigerian naira ended its five-day losing streak in the parallel segment of the foreign exchange (FX) market between June 24 and 28, although it was still unable to cross the N1500 resistance line.

At the authorized forex market on Monday, the value of the naira slightly declined versus the US dollar, according to market statistics released by FMDQ. The data show that the naira closed at N1,508.99/$1 on Monday, compared to N1,505.30/$1 on Friday of last week. The naira entered the black market on Monday, trading at N1,510 midday, up from N1,520 on Friday, after gaining almost 60 basis points versus the dollar.

Olayemi Cardoso, the CBN’s chief, expressed satisfaction with measures taken to stabilize the naira and hinted that the extreme volatility might be abating. Short-term challenges for the naira are expected to increase as the greenback strengthens due to some risk-off sentiment that entered the markets late on Monday.

Amid the CBN’s ongoing efforts to stabilize the naira, its value versus the dollar in both the official and unofficial markets has stayed between the range of N1,400 and N1,525 against the greenback in recent months.

The dollar index, which gauges the strength of the greenback against six major currencies, was up about 20 basis points to trade at 105.9 index points during the midday session.

The yield on the 10-year note was at its highest position since the beginning of the month on Tuesday, down 2 basis points for the day at 4.4554%. The euro gave back some of its modest advances after the first round of the French election went largely according to polls, while the dollar appreciated. At $1.07188, the single currency was down 0.2% as of late.

The bond market was concerned about the spending intentions of former US President Donald Trump, which caused the US dollar to continue its positive trajectory. Following the US Supreme Court’s confirmation on Monday that Trump enjoys partial immunity in the riot charges that resulted in a breach at the US Congress, there was a significant increase in the likelihood that Trump will be reelected as President.

The U.S. bond market is concerned about where the money will come from considering the former President’s recent expenditure plans, and local market conditions could lead to higher inflation once more.

Currency traders focused on U.S. employment opening data that is scheduled for release later in the day and remarks made by Federal Reserve Chair Jerome Powell at the European Central Bank event in Portugal.