Naira weakens slightly to N1,535.9/$ as dollar gains globally

The naira slipped marginally against the US dollar on Monday, marking a soft start to the week as the greenback gained strength in global markets ahead of key US inflation data.

Data from the Central Bank of Nigeria (CBN) showed the local currency depreciated by N1.68 or 0.1 per cent, closing at N1,535.9/$ compared to N1,534.29/$ at the previous close.

Against the Pound Sterling, the naira appreciated slightly by 20 kobo to N2,060/£1 from N2,060.34/£1, while it also strengthened against the euro by N3.85 to N1,782.75/€, from N1,786.6/€. The parallel market rate between the naira and the US dollar held steady at N1,560/$1.

The US dollar rose 0.30 per cent against the euro to 1.16 and gained 0.20 per cent against the British pound to $1.34.

The US Dollar Index (DXY) remained flat at 98.50 as traders awaited July’s Consumer Price Index (CPI) report, which could influence the US Federal Reserve’s interest rate decision next month.

Economists expect headline CPI to rise by 2.8 per cent year-on-year in July, with core CPI up 3.0 per cent year-on-year. A lower-than-expected reading could bolster expectations of a rate cut, potentially weakening the dollar.

Market data suggests a 90 per cent probability of a Fed rate cut in September, with a total of 58 basis points in cuts expected by year-end — implying two quarter-point reductions and a one-in-three chance of a third cut.

Meanwhile, trade tensions eased after US President Donald Trump extended a 90-day freeze on tariff increases for Chinese goods until November 10, as part of a truce with Beijing.

READ ALSO: Naira dips despite strong capital inflows, market optimism as Dollar remains subdued globally

Both sides agreed to halt tit-for-tat tariff hikes and ease restrictions on certain rare earth materials and technologies.

Currency market experts believe the naira could hold its ground in the near term if the CBN sustains its foreign exchange interventions.

“The consistent forex inflows from the CBN are helping to steady the naira despite global dollar strength,” said Abiola Raji, forex strategist at CapitalView Analytics.

“However, the medium-term outlook will hinge on US monetary policy and global oil prices, both of which influence Nigeria’s reserves and currency stability.”

Another analyst, Chuka Nwokolo of TradeMetrics, cautioned that the naira’s gains against the euro and pound might not be sustained if the dollar weakens after the US CPI release.

“We could see volatility later this week depending on the inflation numbers. If the Fed signals more aggressive cuts, the dollar will likely pull back, impacting cross rates,” Nwokolo noted.

For now, traders expect relatively stable trading in the Nigerian forex market, with most attention shifting to Wednesday’s inflation print from the US and any fresh policy signals from the Fed.