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Naira recovers from 18-month lows

By on March 26, 2011

THE Naira bounced from its weakest level in 18 months on Friday, buoyed by expectations that a government agency was about to make a large dollar sale, traders said.

The naira strengthened to 155.80 against the dollar on the interbank market from 156.95 on Thursday, its weakest since late 2009.

“Some banks were selling off their long dollar positions after speculation of planned dollar sales by the Niger Delta Development Commission (NDDC) hit the market and provided liquidity support for the naira,” one dealer said.

The shallowness of the naira market means a single large transaction can have a significant impact on the exchange rate.

Traders have attributed the weakness of recent weeks to nervousness ahead of April elections, with strong dollar demand from companies with unconfirmed letters of credit, payments on foreign credit cards and large forex purchases by bureaux de change.

“We see the naira appreciating further next week with the anticipated month-end dollar sale by major energy companies and the forex auction on Monday where the central bank is expected to continue to sell more dollar,” another trader said.

Source : Daily Champion