Naira Appreciates At I&E Window, Parallel Market On CBN Intervention
By CHUKWUMA KELECHUKWU
The Naira strengthened by 0.05 percent N360.57 at the investors and exporters foreign exchange (I&E FX) window and by 0.28 percent to N360.00 at the parallel market on Monday following the Central Nigeria (CBN) intervention in the inter-bank foreign exchange market.
The apex bank injected the sum of $242.04million into the retail Secondary Market Intervention Sales (SMIS) and CNY 32.3million in the spot and short tenored forwards segment of the inter-bank foreign market on Friday.
According to CBN Director, Corporate Communications Department, Isaac Okorafor, the intervention was driven by requests in the agricultural and raw materials sectors. Okorafor added that the Chinese Yuan, on the other hand, was for Renminbi-denominated Letters of Credit.
Before Friday’s intervention, the apex bank had in June spent a whopping $1.18billion and CNY68.8 million in defense of the local currency which analysts say should be allowed floating.
Although the local currency appreciated on Monday, total turnover in the IEW decreased by 6.0 percent to $198.73 million, with trades consummated within the N315 – N365.70 per dollar.
The overnight lending rate expanded by 492 basis points to 8.93 percent, as the CBN mopped-up liquidity via open market operation (OMO) auction, selling a total of N 400billion – N4.06billion of the 101DTM, N43.11billion of 255DTM and N352.83 billion of 353DTM – worth of bills at respective stop rates of 11.40 percent (previously 11.40%), 11.84 percent (previously 11.63%), and 12.40 percent (previously 12.48%).
Activities in the treasury bills market were bearish, following the liquidity mop-up, as average yield expanded by 5 bps to 12.18 percent. Sell pressure was spread across the mid (+16 bps) and long (+2bps) segment, with respective yield on 94DTM (+76 bps) and 227DTM (+18 bps). On the flip side, demand for 24DTM (-55 bps) bill led to yield contraction at the short (-2 bps) end of the curve.
Similarly, trading in the bond market was bearish, as average yield widened by 14 bps to close at 14 percent. Sell pressure was concentrated at the short (+24 bps) and long (+1 bp) ends of the curve, with respective yields on the FEB-2020 (+11 bps) and JUL-2034 (+3 bps). Conversely, demand for the MAR-2027 (-6 bps) bond led to yield contraction at the mid (-6 bps) segment.
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