The naira maintained its bullish momentum at the unofficial market as it cracked below the N1600/$ resistance line, while the greenback fell in the global foreign exchange market.
The naira traded midweek at N1585-1590/$ bandwidth on the streets of Nigeria’s business capital.
The naira’s fundamentals have significantly improved as the country’s headline inflation showed signs of peaking. NBS data revealed Nigeria’s inflation rate fell to 22.97% in May.
The inflation data indicated a decrease of 0.74 percentage points. compared to the 23.71 percent recorded in April. Bismarck Rewane of Financial Derivatives Company also highlighted that the local currency will fluctuate between N1,600/$ and N1,650/$ on the official foreign exchange market during June and July.
The economist’s prediction was based on data showing CBN’s effort to control the country’s excessive money supply, which peaked in May 2024. Rally in oil prices also boosted the naira fundamentals, given that Nigeria is reliant on Crude Oil for its FX income.
The Israel-Iran conflict caused investors to become uneasy ahead of the Federal Reserve’s highly anticipated interest rate decision later in the day, which caused the US dollar to falter against most other major currencies on Wednesday.
Israel has hammered Iran to stop its nuclear activities in the last six days and has declared that the Islamic Republic of Iran needs a new government.
There are rumors that the US military is increasing its presence in the oil-rich region. Investors worry that an intervention could intensify the conflict in the Middle East with critical infrastructure like supply chains and energy resources.
President Donald Trump called for Iran’s “unconditional surrender” on Monday. The US military is sending more fighter planes to the region to bolster its forces, according to three officials. A major concern for the market is still supply disruptions in the Strait of Hormuz, which carries one-fifth of the world’s seaborne oil.
Two oil tankers collided and caught fire close to the strait. Concerning the effects of electronic interference on ship navigation systems, UK Maritime Trade Operations issued a warning. Other Organization of the Petroleum Exporting Countries members might utilize their surplus capacity to compensate for a drop in Iranian production, according to analysts.
Iran is the third-largest producer of crude oil, with about 3.3 million barrels of crude oil extracted daily (bpd).
However, the dollar has lately found refuge in the market, strengthening by about 1% versus the euro, Swiss franc, and Japanese yen since Thursday, which has helped to offset losses from earlier in the year.
The greenback has lost more than 8% so far this year because of President Donald Trump’s trade policies that undermined confidence in the US economy. The dollar’s depth and liquidity continue to make it a haven.
Investors are now turning their attention to the Federal Reserve, which is set to decide soon on a potential change in interest rates. Recent data indicates that the U.S. economy is slowing, a trend compounded by rising uncertainty stemming from President Trump’s unpredictable policy approach. Adding to the Fed’s challenge are surging crude oil prices, driven by escalating tensions in the Middle East
The Fed’s outlook for interest rates this year and the state of the world’s economy will be of great interest to traders, who anticipate that the central bank will keep borrowing costs unchanged.
Later in the day, a weekly report on unemployment claims is anticipated from the United States. Switzerland, Norway, and Sweden are also expected to make central bank decisions.
Later in the day, a weekly report on unemployment claims is anticipated from the United States. Switzerland, Norway, and Sweden are also expected to make central bank decisions.