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Forex: Dollar higher as new wave of virus causes risk aversion

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The positive performance of the naira in the foreign exchange market continued on Thursday, as the local currency was strengthened at the Investors and Exporters (I&E) window.

The naira appreciated to N385.75 to a dollar at the I&E forex window, after the day’s trading session. It gained N1.19 against the dollar, when compared to the N386.94 to a dollar that it exchanged on Wednesday, June 10, 2020.

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The exchange rate at the I&E window is different from the Central Bank of Nigeria’s published exchange rate, which currently stands at N360/$1. This is also different from the exchange rate at the parallel market, which was stable at N450 to a dollar, according to information on AbokiFX, as of Thursday.

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Available information from the daily trading at FMDQ (where FX is traded by importers and investors) shows that the naira improved against the dollar by N1.75, closing at N385.75 to a dollar, as against the indicative opening rate of N387.50 to a dollar that it opened with on Thursday morning. The opening indicative rate on Thursday also represents a loss of N0.54 when compared to the N386.96 that it opened with on Wednesday.

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A cursory look at data from the FMDQ shows that the turnover for the day witnessed a significant drop by about 80% at $12.45 million, when compared with the $62.28 million that was recorded the previous day.

In a related development, the naira on Thursday June 11, 2020, stabilized at the parallel market otherwise known as the black market as it exchanged for N450 to a dollar, which was the same rate that was recorded the previous day.

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The stability of the naira at the black market can be attributed to a drop in demand for foreign exchange, especially by speculators at the market.

Despite the gains recorded by the naira at the I&E window and the drop in demand for dollars, the $12.45 million turnover on Thursday for over-the-counter spot market is a huge drop from the $300 million daily turnover that was recorded last year.

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