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Friday, December 8, 2023

South African rand firms against dollar, as Nigeria’s naira continues to fall

South African rand firms against dollar, as Nigeria’s naira continues to fall

The South African rand strengthened against a weaker dollar on Friday after U.S. Treasury yields lost some steam, infusing some risk appetite into the markets.

At 1543 GMT, the rand traded at 18.8850 against the dollar , about 0.54% stronger than its previous close.

The dollar last traded around 0.07% weaker against a basket of global currencies.

“The rise in U.S. rates has finally run out of steam. Some dovish Fed speak yesterday saw yields ease off 15+ year highs,” Rand Merchant Bank analysts said in a research note.

“Whether this is a change in direction or just a pause remains to be seen. But global markets sigh with relief.”

Like other risk-sensitive currencies, the rand often takes cues from global factors such as U.S. monetary policy and the direction of the safe-haven dollar.

Locally, data showed South Africa posted a trade surplus of 13.28 billion rand ($703.87 million) and a budget deficit of 47.33 billion rand in August.

Nigeria‘s naira continues to weaken

Meanwhile, Nigeria’s naira fell to a record low on the black market that was driven mostly by speculative demand.

Nigerians now turn to the dollar as a store of value, according to traders.

The unit was on Friday quoted at 1000 naira to the U.S. dollar on abokiFx, a firm that publishes online black market exchange rates for the currency, compared with 965 on Tuesday.

“The current free fall of the naira is mostly driven from speculation as the black market premium has reached 23.3%,” one trader said.

“The pressure also shows that liquidity in the official market is unable to support about $400 million petroleum importers need monthly to import refined fuels, given their 70% control of the market,” he said.

The currency of Africa’s largest economy has been weakening on the black market due to speculative activities and as excess demand is funnelled to the informal market, widening the gap with the official market, where restrictions on trading the currency was lifted in June.

 

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