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Naira firms on Oil company, Banks Dollars Sale

By on August 30, 2012

Forex

The naira firmed against the U.S. dollar on the interbank market on Wednesday, supported by dollar sales by an oil company and some banks towards the close of trading.

The naira closed at 158.05 to the dollar on the interbank market, stronger than the 158.15 it closed at the previous day.

Traders said a local unit of U.S. oil giant Chevron sold about $12 million to some lenders, while some units of foreign banks sold additional dollars in the market to enable them to stay within the stipulated 1 percent open position limit.

 

“The naira actually trended down intraday because of strong dollar buying but strengthened toward the close of trading because some foreign banks sold additional dollars in the market, which provided support for the naira,” one dealer said.

The central bank in July raised the cash reserve requirement for lenders to 12 percent from 8 percent, and reduced net open foreign exchange positions to 1 percent from 3 percent, to restrict the money supply and support the local currency.

The naira has been pressured by global risk aversion but has gained more than 1.25 percent year-to-date on the central bank’s measures and a resurgence of offshore investors buying local debt, boosting dollar liquidity in the market.

Traders said the naira will continue to hover around the present level for the rest of the week as trickles of dollars from oil companies should subdue any buying pressure from importers.

At its twice weekly foreign exchange auction, the central bank sold $180 million naira at 155.80 to the dollar, compared with the $250 million sold at the same rate on Monday.

 

Source: Bloomberg