The Nigerian naira surged to a five-month high of N1,497.5/$ at the first trading session of the week in the official market, supported by better foreign exchange (FX) liquidity and less demand pressure.
The local currency last traded at such a level on March 4 at the Nigerian foreign exchange market.
The Naira’s recent upsides of late correlate with the weakness in the dollar in the global foreign exchange market.
Professor Murtala Sagagi, a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria, expressed optimism about the naira’s future, predicting it could strengthen to around N1,400 against the US dollar by the end of 2025.
His prediction is supported by encouraging events, including a rise in foreign investment, an improvement in the balance of payments, and a daily increase in crude oil production. These observations were made at the July meeting of the Monetary Policy Committee (MPC), and the CBN made the information public on September 12.
“With the recent increase in daily crude oil production, new inflows of capital, and an improved balance of payments, it is likely that the naira will continue to appreciate, potentially reaching the projected N1,400 per dollar before the end of the year,” Sagagi stated
He also underscored the importance of reducing inflation and emphasized the ongoing effectiveness of the Central Bank of Nigeria (CBN).
The US Dollar Index (DXY), which gauged the American dollar’s strength against six major currencies, was trading at 97 index points on Tuesday as it kept losing ground for the second straight session.
The American ended Monday’s trading session lower than it started because of pressure from the improving risk sentiment in the US session.
The Euro, Swiss franc, and Japanese yen are leading the way higher, making the dollar the weakest currency in the G10 FX market on Tuesday.
The news that Sino-US relations are continuing to improve is also helping, as Presidents Trump and Xi are scheduled to meet on Friday to discuss how TikTok will be treated in the US going forward.
The dollar index is consolidating within the descending channel pattern, indicating a prevailing bearish bias, according to the technical analysis of the daily chart.
The bearish bias is reinforced by the 14-day Relative Strength Index (RSI) being below the 50 level. Furthermore, the short-term price momentum is weaker because the dollar index’s latest price action is below the nine-day Exponential Moving Average.
Latest price action showed the psychological level of 97 might provide the greenback an immediate support. This is followed by 96.5, which was reached on July 1 and is the lowest level since February 2022. The dollar index would test the lower limit of the descending channel at 95.30 if there were any more declines.
Gold gained bullish momentum in the second half of Monday’s trading session and rose almost 1 percent after a calm start to the week. The precious metal is trading at a new record-high above $3,680 as it continues its rally in Tuesday’s European session.