The dollar eased slightly against a basket of currencies on Monday while dropping from N1,598.06/$1 at the weekend to N1,555/$1 yesterday across parallel markets in the country.
This came after President Joe Biden announced on Sunday that he will not be seeking re-election and endorsed Vice President Kamala Harris as the Democratic candidate for the U.S elections which would be holding in November.
Harris quickly received the backing of many within the party, but several high profile names stayed quiet, including former House of Representatives Speaker Nancy Pelosi.
Former President, Donald Trump, the Republican nominee, sits well ahead in betting markets, to win the election. After the announcement was made, the demand for FX eased slightly with parallel markets in Lagos, Kano and Port Harcourt where the dollar was sold between N1,555/$1 – N1,560/$1.
On the other hand, the naira appreciated by 6.4% to N1,500.32/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The dollar index – a measure of its value relative to a basket of foreign currencies – fell 0.1% at 104.30.
Reacting to the development, a financial analyst who spoke based on anonymity, noted that the specific impact on Nigeria’s parallel FX markets would depend on the broader market’s perception of the US political situation and its ripple effects on global financial stability.
He stated that with this development, investors might flock to safe-haven assets such as gold or stable currencies like the Swiss Franc or Japanese Yen, impacting the demand and supply dynamics for the Naira.
“There is no doubt that Biden’s resignation introduced uncertainty in global markets, including the FX markets. Investors might react with caution, leading to increased volatility in currency values.
What happened in the last few weeks taught us we should not expect the dollar to react to election developments unless the candidates make specific reference to the U.S. currency. However, we expect the market to continue trading on the back of the data and central banks because we posit that it is way too early to assess the impact of Biden’s move”, he said.
Credit: The Sun